NEW YORK – A federal judge in Texas has ordered a 55-year-old U.S. agency that caters to minority-owned businesses to serve people regardless of race, standing by white business owners who claimed the program discriminated against them.
The ruling was a major victory for conservative activists who have waged a wide-ranging legal battle against racially charged workplace programs, which was bolstered by the Supreme Court's ruling last June dismantling affirmative action programs in higher education.
Advocates for minority-owned businesses have criticized the ruling as a serious blow to efforts to level the playing field for Black, Latino and other minority business owners who face barriers to accessing financing and other resources.
Judge Mark T. Pittman of the U.S. District Court for the Northern District of Texas, appointed by former President Donald Trump, ruled that the Minority Business Development Agency's eligibility criteria violate equal protection guarantees of the Fifth Amendment because they assume that racial minorities are inherently disadvantaged.
The agency, part of the U.S. Department of Commerce, was first established during the Nixon administration to address discrimination in the business world. The Biden administration expanded its scope and reach through the Infrastructure and Jobs Investment Act in 2021, making it a permanent agency and increasing its funding to $550 million over five years.
The agency, which helps minority-owned businesses obtain financing and government contracts, now operates in 33 states and Puerto Rico. According to its annual reports, the agency helped companies raise more than $1.2 billion in capital in fiscal year 2022, including more than $50 million for Black-owned companies, and more than $395 million for Hispanic-owned companies.
In a strongly worded 93-page ruling, Pittman said that although the agency's work may be intended to “alleviate opportunity gaps” faced by minority-owned businesses, “two wrongs do not make a right. MBDA's racial premise is a mistake.” mistake.”
Pittman ruled that while the agency technically offers its services to any business that can demonstrate its “social or economic disadvantage,” white people and others not on the “list of preferred races” must overcome the assumption that they are not disadvantaged. The “unconstitutional presumption,” he said, had been used for “fifty-five years too long.”
“Today we are running out of time,” Pittman wrote.
Dan Linnington, vice chancellor at the conservative Wisconsin Institute for Law & Liberty, which filed the lawsuit, said this is a “historic” victory that could impact dozens of similar federal, state and local government programs, which also inherently take into account people of certain races. The deprived. He said the ruling would pave the way for his and other conservative groups to target those programs.
“We just think this decision will apply broadly to hundreds of programs that use identical language,” Linnington said.
Justice Department lawyers representing the Minority Business Development Agency declined to comment on the ruling, which can be appealed to the conservative-leaning 5th U.S. Circuit Circuit in New Orleans. In court filings, the Justice Department cited congressional research showing that minority business owners face systemic barriers, including being denied loans at a rate three times higher than non-minority businesses, often receiving smaller loans and being charged higher interest rates.
John F. Robinson, president of the National Minority Business Council, said the ruling represents “a blow against minority-owned businesses” and does nothing to help majority-owned businesses because they already have access to federal resources through the Small Business Administration.
“It would potentially hurt the entire minority business sector because there would be fewer services available to minority-owned businesses,” Robinson said.
In a similar ruling last year, a Tennessee judge struck down a program run by the Small Business Administration that directed some government contracts toward minority-owned businesses.
Several other lawsuits have targeted government and private sector programs designed to benefit minority-owned businesses, including the case against Fearless Fund, an Atlanta-based organization that provides early-stage financing to businesses owned by women of color.
Ariane Simon, CEO of the Fearless Fund, criticized what she described as companies' waning commitment to equity programs in the face of mounting legal challenges.
“Virtually every day there seems to be a new legal ruling that undermines our attempt to close the economic gaps that exist for people of color,” she said in a statement. “The inaction of those who claim to be committed to fairness has created a vacuum for this to happen.”
But Alfonso David, president and CEO of the World Black Economic Forum, which helps represent the Fearless Fund, said the Texas ruling doesn't necessarily predict how those other cases will play out.
He pointed to another ruling on Wednesday in which a conservative group lost its attempt to reinstate a lawsuit against pharmaceutical giant Pfizer over a fellowship program for black, Latino and Native American professionals.
The New York-based 2nd U.S. Circuit Court of Appeals ruled on Wednesday that No Harm lacked standing because it did not identify the plaintiffs by name. The Fear Fund makes a similar argument against the American Coalition for Equal Rights, the conservative group that filed a lawsuit on behalf of anonymous women, David said.
Do No Harm Board Chairman Dr. Stanley Goldfarb said he was “disappointed with the court's decision” and would continue to pursue appeals.
Pfizer did not immediately respond to requests for comment. Although the company won the dismissal of the original suit, it changed the criteria for its fellowship program last year to open it to all genders.
DEI advocates celebrated a separate victory Tuesday when a federal appeals court ruled that a Florida law limiting discussions about race and diversity in the workplace is unconstitutional.
“I think what we're going to see over the coming months and years is just a flurry of lawsuits from different directions, with conservative and liberal judges across the country coming to decisions that are diametrically opposed to each other,” said Executive Director David Glasgow. Director of the Meltzer Center for Diversity, Inclusion, and Belonging at New York University School of Law. “That will eventually have to come back to the Supreme Court.”
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AP Race & Ethnicity Reporter Graham Lee Brewer and AP Business Writer Haleluya Hadero contributed to this story.
