Minority-business aid opened to all
Federal judge in Texas orders Commerce to extend assistance to white company owners
A federal judge in Texas has ordered a Commerce Department agency focused on minority-owned businesses to extend its assistance to white business owners, too.
Judge Mark Pittman of the North District of Texas ruled this week that the Minority Business Development Agency’s statutory presumption about race and ethnicity is unconstitutional.
The agency, created by the Nixon administration in 1969, was tasked with helping minority-owned businesses access capital and government contracts through a network of business centers across the country, including one in Houston and four in Texas.
The case was brought by three business owners — a contractor in Florida, an architect in Wisconsin and a Tarrant County entrepreneur who runs a clinic called Sexual Wellness Centers of Texas. All three said that they had sought assistance from the MBDA, only to be stymied at an early stage in the process by a drop-down box on the intake form asking applicants to specify their ethnicity.
“They all worked hard to get where they are, they all overcame obstacles in pursuit of the American Dream, they all care deeply for their businesses, and they all wanted — but couldn’t obtain — assistance from the same federal program,” Pittman wrote in his ruling. “They’re also all white, a salient detail in this case.”
While Pittman declined to declare the Minority Business Development Agency itself unconstitutional, he concluded that it must stop using its racial presumption and extend assistance to all applicants.
Pittman’s ruling comes after, and references, a June 2023 Supreme Court ruling which found that race-conscious admissions policies at U.S. colleges and universities violate the 14th Amendment’s guarantee of equal protection. That ruling, in Students for Fair Admissions v. Harvard, galvanized a flurry of challenges to initiatives across the country supporting minorityand women-owned businesses or MWBEs.
Several of those have come in
the Houston area, which has a number of such initiatives in the public and private sectors.
In August, a Trump-affiliated foundation, America First Legal, filed suit against Houston fintech Hello Alice, challenging a program seeking to award grants of $25,000 each to Black entrepreneurs for the purchase of a commercial vehicle.
In September, two contractors headquartered in Spring, backed by the Pacific Legal Foundation, challenged a longstanding city of Houston program that awarded a certain percentage of city contracts to certified small businesses owned by women and minorities. “The argument that we would make is that really, regardless of what study you have, this is just on its face a violation of equal protection rights,” Erin Wilcox, a Pacific Legal Foundation attorney, said at the time.
Plaintiffs have challenged other federal initiatives that rely on a presumption of disadvantage based on race or ethnicity, said Christopher Slottee, an attorney with Seattle-based law firm Schwabe, Williamson and Wyatt with expertise in litigation on behalf of Alaska native corporations and tribal governments.
In July, a federal judge in Tennessee barred the Small Business Administration from using such a presumption in qualifying applicants for assistance through the agency’s 8(a) Business Development program. Another case is challenging the Department of Transportation’s Disadvantaged Business Enterprise program on similar grounds.
“We anticipate that there will be continued challenges to different government contracting preferences, particularly in light of Students for Fair Admission and the United States Supreme Court’s indication that racial presumptions in federal government programs have a difficult standard to meet in order to survive,” Slottee said.
Slottee added that he does not think the Minority Business Development Agency will appeal Pittman’s ruling. The SBA, for its part, had pivoted rather than appeal the ruling, and is now soliciting individual narratives from 8(a) applicants to determine eligibility for the program.