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Phillips Seafood in Baltimore got $5M in COVID relief. Faidley Seafood got $0. SBA says court cases put halt to priority group payments.

It’s a tale of two crab houses. Phillips Seafood in Baltimore received $5 million through the Restaurant Revitalization Fund and its Ocean City branch got nearly $3.2 million.

Faidley Seafood, meanwhile, a woman- and veteran-owned business in Lexington Market dating back to 1886, got nothing.

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Area business owners are pointing to that example — Phillips versus Faidley — as evidence that the Small Business Administration made arbitrary decisions in the distribution of federal funds through a program meant to help restaurants reeling from the coronavirus pandemic. More than 400 Baltimore businesses got the grants — which range from as low as $1,160 for a Belvedere Square pizza spot to as much as the $5 million for Phillips, according to data released July 16 by the SBA.

Many others got nothing at all. Nationally, two-thirds of applicants — amounting to almost 200,000 restaurants — didn’t receive the grants they had asked for, according to numbers provided by the Independent Restaurant Coalition, an industry group formed during the pandemic.

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In the process of distributing grants, the SBA picked “winners and losers,” said Damye Hahn, who co-owns Faidley Seafood with her parents Bill and Nancy Devine. “They really screwed this one up.”

Faidley qualified as a “priority” business, according to SBA guidelines for the grants mandated by Congress. Hahn’s father is a Navy veteran and both she and her mom are co-owners, making the restaurant a woman- and veteran-owned business.

Hahn said she and her family actually were approved for a grant of several hundred thousand dollars — the difference between their revenue in 2020 and 2019. An email in late May promised funds within days.

“We were just ecstatic,” she said.

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They need to leave their current digs in Lexington Market when the new market opens, a costly move for the business. A sit-down restaurant in Catonsville is still in the works.

But Hahn and nearly 3,000 other priority businesses saw their promised relief payments halted after three lawsuits challenged the legality of prioritizing certain groups, which included not only women and veterans but other disadvantaged individuals. Judges in each suit ruled against the SBA.

Hahn learned via email that Faidley wouldn’t be getting any money after all.

Chris Hatch, regional communications director for the SBA, wrote in an email to The Baltimore Sun that: “Due to the legal conclusions in recent court rulings, SBA is unable to pay certain priority applicants that received notice of an award.”

Hatch added that the SBA’s leadership “is frustrated with this outcome and remains committed to doing everything we can to support disadvantaged businesses to get the help they need to recover from this historic pandemic. SBA will continue to communicate with small businesses owners who were approved for funds under the Restaurant Revitalization Fund but now cannot receive funds.”

“I don’t begrudge Phillips from getting anything,” Hahn said. But she wants to see her business benefit, too. “We all struggled.”

Pandemic restrictions in Baltimore City were particularly severe during the pandemic; her family’s business also is struggling with the skyrocketing cost of crab.

“I can’t charge $50 for a crab cake,” Hahn said. “Our margins are getting thinner and thinner.”

On Thursday, Hahn and owners from about 20 Baltimore restaurants gathered for a livestreamed news conference from Faidley Seafood’s bustling outpost in the public market. Some of the owners who came had received funding but wanted to show their support.

“We wanted desperately to get through this,” Hahn told the group, getting teary-eyed as she spoke of her travails during the past year. “We’re asking Congress to please … replenish the fund. To help us stay alive through another generation.”

The group of restaurant owners wants Congress to replenish the $28.6 billion Restaurant Revitalization Fund. They hope their efforts will gain national traction, and unveiled a website, replenishthefund.org, designed in red and blue to emphasize what they say is the bipartisan nature of their aims.

Restaurant advocates have dinged the SBA for a lack of transparency in how it awarded the grants, and called on Congress to enact further relief. Earlier this month, the Independent Restaurant Coalition said a number of ineligible businesses, including recreational facilities and hotel chains, had received the grants that were designed to help only restaurants.

Locally, Thiru Vignarajah, a former state deputy attorney general, signed on as a spokesman for their cause. The former candidate for Baltimore mayor and state’s attorney has become a familiar figure at pro-restaurant rallies, having most recently represented Fells Point businesses that threatened to withhold taxes until the city addressed lawlessness in the neighborhood. Previously, he lobbied city officials to reopen restaurants, calling pandemic shutdowns “rushed and arbitrary.”

Vignarajah said the main point of this latest effort is to press Congress to action. He positioned himself in contrast to Stephen Miller, the former aide to President Donald Trump who sued the Small Business Administration on behalf of the owners of a restaurant in Texas. That resulted in many businesses — including Faidley Seafood — losing out on grants they had been promised.

Miller argued that the work of President Joe Biden’s administration to prioritize minority and women-owned businesses is unconstitutional.

“We hope it doesn’t come to litigation,” Vignarajah said.

Of Miller’s lawsuit, which resulted in some recipients seeing aid rescinded, he said, “That was an unfortunate, politically motivated, Trump-driven lawsuit.”

Phillips Seafood did not respond to a request for comment.

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