In 2022, Christian Bruckner and his company, Project Management Corporation, sued the federal government in the U.S. District Court for the Middle District of Florida (Tampa Division). The plaintiffs claimed that the Infrastructure Investment and Jobs Act’s earmarked 10% of its transportation funds for socially and economically disadvantaged and women-owned contractors violated the Constitution by discriminating against Bruckner, a white immigrant who is ineligible for a presumption of social and economic disadvantage.

As we previously discussed, the Tampa federal district court dismissed Bruckner’s lawsuit on April 3, 2023, because he failed to identify any specific contract he intended to bid on that would be subject to race- or sex-based criteria due to the Infrastructure Investment and Jobs Act. On April 3, the Tampa federal district court entered final judgment dismissing Bruckner’s lawsuit. Bruckner has not yet appealed that dismissal.

Shortly before Bruckner’s lawsuit in Florida was dismissed, he, with Jeffrey Nuziard and Matthew Piper, filed a new lawsuit on March 3, in the U.S. District Court for the Northern District of Texas (Fort Worth Division): Jeffery Nuziard, et. al. v. Minority Business Development Agency, et. al., Case 4:23-cv-00278-P. This lawsuit challenges the Minority Business Development Agency (MBDA) and funding provided to the MBDA by the Infrastructure Investment and Jobs Act (the Infrastructure Act). One of the law firms that represented Bruckner in his dismissed lawsuit also represents the plaintiffs in this lawsuit.

This new Texas lawsuit raises many of the same arguments made by Bruckner in the Florida lawsuit—the MBDA is intended to support minority-owned businesses, enterprises, and entrepreneurs by providing “resources relating to management,” “technological and technical assistance,” “financial, legal, and marketing services,” and “services relating to workforce development.” To qualify as a “minority business enterprise” eligible for assistance from the MBDA, a business enterprise must be “no less than 51 percent-owned by one or more socially or economically disadvantaged individuals” and its management and daily business operations must be “controlled by one or more socially or economically disadvantaged individuals.”

Bruckner and his fellow plaintiffs allege in this new lawsuit that only individuals belonging to the certain racial or ethnic groups described are presumed to be “socially or economically disadvantaged individuals” and therefore presumed to own a qualifying minority business. Any other group wishing to obtain status as “socially or economically disadvantaged” must make an “adequate showing by representatives of the group” to the federal government.

The Texas lawsuit further alleges that Bruckner and his fellow plaintiffs are Caucasian and do not fall into any of the enumerated racial or ethnic groups that are presumed to be comprised of socially or economically disadvantaged individuals and are therefore not eligible for assistance from the MBDA. Bruckner alleges that this limitation on who can receive assistance from the MBDA is racially discriminatory and violates the Equal Protection Clause of the U.S. Constitution. As relief, Bruckner asks the court to declare the MBDA unconstitutional to the extent that it provides Business Center Program services or other benefits and services based on race or ethnicity. Bruckner requests that the court, upon declaring the MBDA unconstitutional on the stated grounds, enjoin the federal government from “imposing the racial and ethnic classifications defined in 15 U.S.C. § 9501 and implemented in 15 U.S.C. §§ 9511, 9512, 9522, 9523, 9524, and 15 C.F.R. § 1400.1 and/or as otherwise applied to the MBDA Business Center Program and other MBDA programs and services, and additionally enjoining Defendants from using the term ‘minority’ to advertise or reference their statutorily authorized programs and services.”

Bruckner and his fellow plaintiffs filed a motion for a preliminary injunction. The arguments are likewise similar to those made in Bruckner’s original lawsuit: government efforts to redress discrimination must be in response to specific episodes of discrimination and the federal government has not identified any specific act of discrimination it is attempting to remedy.

On April 24, 2023, the federal government responded to that motion. The government argues that each of the plaintiffs lacks standing because:

• they have not shown a sufficiently concrete or particularized harm because they have not demonstrated that they were “ready and able” or actually planning or in a position to access the services provided by the relevant business centers;
• the general “dignity” harms that the plaintiff’s claim is too remote to establish concrete injury;
• they have failed to pursue claims against the specific MBDA’s business centers that allegedly caused their harm; and
• they have failed to sufficiently allege that they meet the race-neutral criteria set by the various MBDA business centers.

The federal government also argues that even if the plaintiffs had standing, the MBDA program survives strict scrutiny because “[t]he Minority Business Development Act was enacted to remedy specific and well-documented discriminatory practices that have prevented minority business owners from accessing credit and capital and competing equally in the free market of America.” The federal government relies on the evidence developed by Congress since passing the Minority Business Development Act, including congressional evidence from 1982, 1987, 1988, 1996, 2010, 2016, and 2022 that, according to the federal government, “demonstrate[s] that, unfortunately, discrimination and its lingering effects persist and continue to have a negative impact on aspiring minority business owners.”

The federal government also argues that the MBDA is narrowly tailored because:

the goals of the MBDA Business Center program are to: (1) assist minority business enterprises in accessing capital, contracts, and grants, and creating and maintaining jobs; (2) provide counseling and mentoring to minority business enterprises; and (3) facilitate the growth of minority business enterprises by promoting trade. 15 U.S.C. § 9522. These goals are synchronized to current MBEs, as illustrated by the following findings from MBDA studies. See, supra, n.8. To address these issues, the MBDA Business Center program is limited and targeted. The MBDA does not provide grants or government contracts directly to MBEs. Instead, the MBDA provides grants and guidance to Business Centers, which in turn are directed to assist MBEs. Specifically, MBDA Business Centers are required to provide “referral services” to MBEs and to “develop, cultivate, and maintain a network of strategic partnerships with organizations that foster access by minority business enterprises to economic markets, capital, or contracts.” 15 U.S.C. § 9524(a)(1). MBDA Business Centers are also allowed the independence to develop their own programs and services to achieve the aforementioned goals. Id. at § 9524(a)(1)(A)(ii). Because the MBDA Business Center Program is limited in scope and targeted to address the specific needs of the MBE community, it aligns squarely with the identified and well-documented need and is thus narrowly tailored.

In regard to the entities that are eligible for assistance from business centers supported by the MBDA, the federal government also argues that the “presumption of social or economic disadvantage for particular racial or ethnic groups is flexible; the list of those who may qualify for the presumption under the MBDA statute and regulations is not static” and that:

Plaintiffs have not alleged any facts demonstrating that the statute or regulations limit the ability to be presumed socially or economically disadvantaged based exclusively on race. Because the regulations require any presumption to be based on strong evidence, the statute is appropriately tailored. It is not over-inclusive, because it provides a remedy for groups only where discrimination has been shown through evidence. Nor is it under-inclusive, because any group may apply to make that showing.

Finally, the federal government also argues that the plaintiffs’ claims of irreparable harm are speculative and the public interest favors denying an injunction. The federal government argues that the plaintiffs’ claims of irreparable harm are speculative because “Plaintiffs Nuziard and Piper failed to apply to or seek benefits from the MBDA or any Business Centers, and Plaintiff Bruckner appears ineligible because his company has not been in business long enough to meet the Orlando Business Center’s threshold requirement.” The federal government argues that public interest favors denial of the motion because of any injury the plaintiffs have suffered:

is negligible compared to the impact on and harm caused to the public if the injunction were granted. If the operations of the MBDA were to be enjoined or halted because of this litigation, socially and economically disadvantaged business owners may lose out on guidance and assistance in securing contracts and capital investment, and the public interest would be harmed by the suspension of the significant job creation that the MBDA has provided to disadvantaged areas.

While this new lawsuit is not the same type of attack on federal government contracting set-asides for social and economic disadvantage contained in Bruckner’s initial lawsuit, it is a continuation of a series of legal challenges to the various federal government contracting programs that assist socially and economically disadvantaged entities. As such, Alaska Native Corporations and Tribes, as well as other socially and economically disadvantaged entities, may want to monitor this lawsuit, because it has the potential to result in negative case law that could be used to mount a collateral attack on the Small Business Administration’s 8(a) program, the DBE (Disadvantaged Business Enterprise) program, or other contractual assistance provided by the federal government to socially and economically disadvantaged business entities.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.