It’s a ruling reverberating across the country — even if the ramifications aren’t yet clear.
A U.S. District Court judge in Texas last week ruled that a federal agency created to assist minority business owners could not use race as a deciding factor in whom to serve, essentially forcing it to open to white entrepreneurs.
The Minority Business Development Agency, created in 1969, has offices across the country, which now must abide by the judge’s decision unless it is appealed. Resources like help getting federal contracts, business consulting services and access to grants and loans aimed at addressing opportunity gaps for minority businesses now must be available to businesses regardless of race.
Many people see the MBDA court battle as part of a larger trend of lawsuits from conservative activists that aim to dismantle affirmative action in education and business. This is now at least the second federal agency in nine months that has been ordered by a judge to change how they administer minority business programming.
The MBDA is still exploring its options in the case, but in the meantime the agency is continuing its work assisting businesses owned by socially or economically disadvantaged individuals “in a manner consistent with the court’s decision,” Eric Morrissette, acting undersecretary of commerce for minority business development, said in an emailed statement.
A spokesperson did not respond to follow-up questions from the Atlanta Journal-Constitution.
It’s unclear how programs and grants would be affected. The leader of the institute that houses Georgia’s MBDA said the organization would continue working to support business owners.
How the case unfolded
In March 2023, three men – Jeffrey Nuziard, Christian Bruckner and Matthew Piper – sued President Joe Biden, administration officials and the MBDA, alleging agency offices in Texas, Florida and Illinois refused to help them because they are white.
In a 93-page ruling, issued March 5 on the 55th anniversary of the MBDA’s creation, Judge Mark Pittman acknowledged the MBDA benefits non-minorities “as an economy is only as strong as its weakest link.” But, he wrote, “that was little comfort to Plaintiffs when the Agency wouldn’t help them because of their skin color.”
The MBDA was established as an entity under the Commerce Department by President Richard Nixon in a 1969 executive order. It was then renewed by every president until 2021, when Congress and Biden enshrined it in law. The president has proposed $80 million for the agency in his fiscal year 2025 budget.
The agency serves “socially or economically disadvantaged” individuals, which U.S. code defines, in part, as someone “who has been subjected to racial or ethnic prejudice or cultural bias … because of the identity of the individual as a member of a group.”
In deciding who is socially or economically disadvantaged, before this ruling, the MBDA presumed Blacks, African Americans, Latinos, American Indians, Alaska Natives, Asians, Native Hawaiians, Pacific Islanders and Hasidic Jews were disadvantaged.
But Pittman, a Trump appointee, said that violates the Fifth Amendment right to equal protection. He issued a permanent injunction against the entire agency using the presumption in determining who can receive help from their business center programs, essentially opening it up to all races and ethnicities.
‘Damages the soul of the country’
The Georgia MBDA Business Center is housed at the Georgia Tech Enterprise Innovation Institute, the university’s economic development arm, and has provided assistance for 20 years.
Donna Ennis, the institute’s director of community engagement and program development, said the Georgia office has always helped everyone.
“We have had a number of companies with all ethnicities … call us and we always make sure that we provide a service to them, even if it’s just making sure that they’re getting to the right resource,” Ennis said.
This year the Georgia MBDA’s budget is about $530,000. But now it’s unclear how local resources and programs will be directed.
The day after last week’s ruling, Georgia MBDA officials had not received any guidance or information from the federal agency on how to move forward in light of the injunction. A Commerce Department spokesperson did not respond to follow up questions from The Atlanta Journal-Constitution about any guidance since given to local offices.
The MBDA also gives grants to universities and nonprofits across the nation for entrepreneur support and training programs. In 2022, Savannah State University received a $900,000, two-year grant to revamp their entrepreneurship minor. A spokesperson for the school said last week that the university had not received any notification of a change in funding.
The agency has also partnered with the financial literacy nonprofit Operation HOPE to help run its Enterprising Women of Color program in five cities, including Atlanta, where 375 women have been served.
Operation HOPE’s CEO and founder John Hope Bryant told the AJC he doesn’t think the ruling will change his organization’s work, but he believes it impacts something deeper than resources.
“I think it damages the soul of the country,” Bryant said.
Legal wins and losses
The MBDA decision follows a similar ruling last summer against a U.S. Small Business Administration (SBA) minority contracting program known as 8(a), which barred the agency from presuming certain racial and ethnic groups were socially disadvantaged.
In the wake of that ruling, the SBA now requires business owners fill out a questionnaire or write a narrative about being socially disadvantaged. In the weeks after that new requirement was put in place, the SBA reviewed or recertified thousands of current 8(a) participants and “it seems as if it’s still business as usual,” said Jennifer Pasley, project director of the Georgia MBDA Business Center.
Atlanta-based venture capital firm Fearless Fund is another legal battlefield in this push against affirmative action. The firm was sued last summer, just weeks after the Supreme Court struck down race-based admissions practices at colleges and universities, over a $20,000 grant program for Black small businesswomen.
“Practically every day there seems to be a new legal ruling that chips away at our attempt to close economic gaps that exist for people of color,” Arian Simone, Fearless Fund CEO and co-founder, said in a statement.
But Alphonso David, president and CEO of the Global Black Economic Forum and one of the lead lawyers for Fearless, said not all recent rulings have been wins for conservative activists. He noted that decisions from the Second Circuit Court and the Eleventh Circuit Court have been wins for advocates of diversity programs.
For Ennis and the Georgia MBDA team, one ruling doesn’t mean they will stop trying to help bolster communities through economic development.
“I do not see us stopping in any kind of way in terms of being able to help companies grow, because by helping companies grow, they become employers, they create jobs, they build communities,” Ennis said.
Mirtha Donastorg, The Atlanta Journal-Constitution (TNS)