An American agency created to help minority-owned businesses win government contracts to also support white businesses

NEW YORK (AP) – A federal judge in Texas ordered a 55-year-old U.S. agency that serves minority-owned businesses to serve people no matter race, siding with white business owners who argued this system discriminated against them.

The ruling was a major victory for conservative activists waging a far-reaching legal battle against racial awareness programs within the workplace, bolstered by last June’s Supreme Court ruling eliminating affirmative motion programs in higher education.

Advocates for minority-owned businesses called the ruling a significant blow to efforts to level the playing field for Black, Latino and other minority business owners who face barriers in accessing financing and other resources.

Judge Mark T. Pittman of the United States District Court for the Northern District of Texas, an appointee of former President Donald Trump, ruled that the Minority Business Development Agency’s qualifying parameters violate the Fifth Amendment’s equal protection guarantees because they presume that racial minorities are inherently disadvantaged .

The agency, a part of the U.S. Department of Commerce, was created through the Nixon administration to combat discrimination within the business world. The Biden administration expanded its scope and reach through the Infrastructure Investment and Jobs Act of 2021, making it a everlasting agency and increasing its funding to $550 million over five years.

The agency, which helps minority-owned businesses obtain financing and government contracts, currently operates in 33 states and Puerto Rico. According to annual reports, the agency helped businesses raise greater than $1.2 billion in capital in fiscal 12 months 2022, including greater than $50 million for Black-owned businesses and greater than $395 million for Latino-owned businesses.

In a sharply worded, 93-page ruling, Pittman said that while the agency’s work could also be intended to “close opportunity gaps” facing minority-owned businesses, “two wrongs don’t make a right.” And MBDA’s racial presumptions are incorrect.”

Pittman ruled that while the agency technically serves any business that may reveal “social or economic disadvantage,” white people and others not included on the “preferred race list” must rebut the belief that they should not disadvantaged. The agency, he said, had been using an “unconstitutional presumption” for “fifty-five years too many.”

“Time is running out today,” Pittman wrote.

Dan Lennington, deputy general counsel on the conservative Wisconsin Institute for Law and Liberty, which filed the lawsuit, called the victory “historic” that would impact dozens of comparable federal, local and state government programs that also goal people of certain races as inherently disadvantaged. He said the ruling would pave the way in which for him and other conservative groups to concentrate on these programs.

“We just think this decision will be widely used across hundreds of programs using the same language,” Lennington said.

Justice Department lawyers representing the Minority Business Development Agency declined to comment on the ruling, which might be appealed to the conservative fifth U.S. Appellate Circuit in New Orleans. In court filings, the Justice Department cited congressional research showing minority business owners face systemic barriers, including being denied loans at rates thrice higher than non-minority businesses, often receiving smaller loans and being charged higher rates. percentages.

John F. Robinson, chairman of the National Minority Business Council, said the ruling is a “blow to minority-owned businesses” and does nothing to help majority-owned businesses because they have already got access to federal resources through the Small Business Administration.

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“This has the potential to harm the entire minority business sector because there will be fewer services available to minority-owned businesses,” Robinson said.

Last 12 months, in an analogous ruling, a Tennessee judge invalidated a program run by the Small Business Administration that directed some government contracts to minority-owned businesses.

Several other lawsuits have targeted government and personal sector programs designed to profit minority-owned businesses, including a case against Fearless Fund, an Atlanta-based organization that gives early-stage financing to businesses owned by women of color.

Arian Simone, CEO of the Fearless Fund, criticized what she called declining corporate involvement in equity programs within the face of growing legal challenges.

“It seems like virtually every day there is a new legal ruling that derails our attempts to close the economic gaps that exist for people of color,” she said in an announcement. “The lack of action by those who claim to place a value on justice has created a vacuum for this to happen.”

But Alphonso David, president and CEO of The Global Black Economic Forum, who helps represent the Fearless Fund, said the Texas ruling doesn’t necessarily predict how the remaining cases will play out.

He pointed to one other ruling Wednesday by which a conservative group lost an attempt to revive a lawsuit against pharmaceutical giant Pfizer over a scholarship program for Black, Latino and Native American specialists.

The 2nd U.S. Circuit Court of Appeals in New York ruled Wednesday that the group Do No Harm lacked standing since it didn’t name the plaintiffs. David said the Fearless Fund is making an analogous argument against the American Equal Rights Alliance, a conservative group that filed the lawsuit on behalf of anonymous women.

Do No Harm chairman Dr Stanley Goldfarb said he was “disappointed with the Tribunal’s decision” and intended to proceed appealing.

Pfizer said it was pleased with the ruling and is “proud of its commitment to diversity, equality and inclusion.” Despite winning the dismissal of the unique lawsuit, the corporate modified the factors for its scholarship program last 12 months to make it open to all races.

DEI advocates celebrated a separate victory on Tuesday when a federal appeals court found a Florida law limiting discussions about race and variety within the workplace unconstitutional.

“I think that over the coming months – and years – we will see an avalanche of lawsuits from all sides, with conservative and liberal judges across the country making decisions that are completely at odds with each other,” said David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging on the New York University School of Law. “And that ultimately the case will have to go back to the Supreme Court.”