If you want to protect Paulie, after smacking the first thug to death, you can go back. Exit the red door to the street, then go left until the end of the street and go back to the yard. Paulie will not follow you any longer. After that, you can get into the car and actually kill some of the thugs by running over them. Although the passage forward is very narrow, you can squeeze yourself to the area where two thugs are beating the third person.