A federal judge in Texas has ruled a government agency designed to help minority-owned businesses cannot refuse assistance to White applicants.
U.S. District Judge Mark Pittman on Tuesday ruled in favor of a group of White business-owners who sued the Department of Commerce's Minority Business Development Agency (MBDA), alleging the agency unconstitutionally gives preferential treatment to non-White entrepreneurs.
"The Agency uses a codified list of preferred races/ethnicities to determine who gets benefits and who doesn’t," Pittman wrote in a 93-page order. "The Agency presumes anyone from the listed groups is ‘socially or economically disadvantaged’ and is thus entitled to services. Anyone outside those groups — white or otherwise — is presumptively not disadvantaged and thus not entitled to benefits."
The MBDA was established by President Nixon in 1969 and made into a permanent agency by President Biden in the 2021 bipartisan infrastructure law. As its name implies, the agency provides access to capital, contracts and market opportunities for minority business enterprises (MBEs).
Federal law defines MBEs as "businesses owned and operated by socially or economically disadvantaged individuals, including African Americans, Asian Americans, Hasidic Jews, Hispanic Americans, Native Americans, and Pacific Islanders," according to the agency.
White plaintiffs represented by the Wisconsin Institute for Law & Liberty (WILL), a conservative legal group, argued in court that they had been denied access to MBDA's services on the basis of their race. They alleged in a lawsuit that the agency violated the Equal Protection Doctrine with its race-based criteria.
Pittman's decision in favor of the plaintiffs cited the U.S. Supreme Court's recent landmark ruling declaring affirmative action policies unconstitutional. The judge said the Supreme Court made clear that race-conscious government policies could only be justified under the Constitution for the limited purpose of addressing specific, identified instances of illegal discrimination.
While Pittman noted that racial minorities have less access to loans, receive less funding when they apply and pay higher interest rates, he said "the record does not show government participation contributed to such disparities."
MBDA attorneys argued that the agency's policies are constitutional because they help rectify past discrimination in which the government played a role, according to the background of the judge's decision. However, Pittman said such reasoning effectively punishes non-minorities.
"While the agency's work may help alleviate opportunity gaps faced by (minority business entrepreneurs), two wrongs do not make a right," Pittman wrote. "And the MBDA's racial presumption is a wrong."
The judge issued an injunction blocking MBDA from considering or using an applicant's race or ethnicity in determining whether he or she could receive assistance from the agency.
"To the extent the MBDA offers services pursuant to an unconstitutional presumption, that’s fifty-five years too many," Pittman wrote. "Today the clock runs out."
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WILL President and General Counsel Rick Esenberg celebrated the decision as a historic win for equality.
"This is exactly why WILL exists. The federal government created a discriminatory agency that persisted for decades. The Biden Administration re-invigorated it and then refused to help millions of businesses based on race. Those days are now over," Esenberg said. "Equality must be the law of the land, and through the bravery and persistence of our clients, we are closer to fulfilling that dream."
However, groups that represent minority-owned businesses called Pittman's decision harmful.
John F. Robinson, president of the National Minority Business Council, told The Associated Press the ruling is "a blow against minority-owned businesses." He pointed out that White entrepreneurs can access help through the Small Business Administration and said a consequence of Pittman's decision is that Black and Hispanic-owned businesses will have less access to resources.
"It has the potential of damaging the whole minority business sector because there will be less service available to minority-owned businesses," Robinson said.
The U.S. Department of Justice has not issued a statement on the ruling. The Biden administration may appeal to the conservative-leaning 5th Circuit Court of Appeals.
Reuters contributed to this report.
