Judge rules agency must serve all races

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, siding with white business owners who claimed the program discriminated against them.

The ruling was a significant victory for conservative activists waging a far-ranging legal battle against race-conscious workplace programs, bolstered by the Supreme Court’s ruling last June dismantling affirmative action programs in higher education.

Advocates for minority-owned businesses slammed the ruling as a serious blow to efforts to level the playing field for Black, Hispanic and other minority business owners who face barriers in accessing financing.

Judge Mark T. Pittman of the U.S. District Court of the Northern District of Texas, who was appointed by former President Donald Trump, ruled that the Minority Business Development Agency’s eligibility parameters violate the Fifth Amendment’s equal protection guarantees because they presume that racial minorities are inherently disadvantaged.

The agency, which helps minority-owned businesses obtain financing and government contracts, operates in 33 states and Puerto Rico. According to its yearly reports, the agency helped businesses raise more than $1.2 billion in capital in fiscal year 2022, including more than $50 million for Blackowned enterprises and more than $395 million for Hispanic-owned businesses.

In a sharply worded, 93-page ruling, Pittman said that while the agency’s work may be intended to “alleviate opportunity gaps” faced by minority-owned businesses, “two wrongs don’t make a right. And the MBDA’s racial presumption is a wrong.”

Pittman ruled that while the agency technically caters to any business that can show their “social or economic disadvantage,” white people and others not included in the “list of preferred races” must overcome a presumption that they are not disadvantaged.

Dan Lennington, deputy counsel at the conservative Wisconsin Institute for Law & Liberty, which filed the lawsuit, called it “a historic” victory that could affect dozens of similar federal, local and state government programs, which also consider people of certain races inherently disadvantaged. He said the ruling will pave the way for his and other conservative groups to target those programs.

Justice Department lawyers representing Minority Business Development Agency declined to comment on the ruling, which can be appealed to the conservative-leaning 5th U.S. Circuit of Appeals 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 nonminority firms, often receiving smaller loans and being charged higher interest rates.

Several other lawsuits have targeted government and private sector programs designed to benefit minority-owned businesses, including the case against the Fearless Fund, an Atlanta-based organization that provides early-stage funding to businesses owned by women of color.

But Alphonso David, president and CEO of The Global Black Economic Forum, who is helping to represent the Fearless Fund, said the Texas ruling is not necessarily predictive of how those other cases will play out.

He pointed to another ruling 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 Wednesday that the group, Do No Harm, lacked standing because it didn’t identify the plaintiffs by name. David said the Fearless Fund is making a similar argument against the American Alliance for Equal Rights, the conservative group that filed its lawsuit on behalf of anonymous women.