On March 5, 2024, in its opinion and order for the case of Jeffrey Nuziard, et. al. v. Minority Business Development Agency, et. al., Case 4:23-cv-00278-P, the U.S. District Court for the Northern District of Texas (Fort Worth Division), issued a nationwide, permanent injunction that enjoins the Minority Business Development Agency, as well as anyone that administers its programs, from “otherwise considering or using an applicant’s race or ethnicity” in determining eligibility for receipt of MBDA program benefits and the MBDA’s programming as a whole. As we previously discussed, this lawsuit centered on the argument that certain programs implemented by the MBDA are racially discriminatory and violate the Constitution’s Equal Protection Clause, because the programs are only available to “socially or economically” disadvantaged individuals, and only certain minority groups are presumed to be socially disadvantaged based on their race or ethnicity.

The plaintiffs, Christian Bruckner, Jeffrey Nuziard, and Matthew Piper, filed their lawsuit nearly one year ago, on March 30, 2023. On June 5, the District Court granted their motion for a preliminary injunction on the same grounds that underlie the current permanent injunction, but only with respect to the Wisconsin MBDA Business Center, the Orlando MBDA Business Center, and the Dallas-Fort Worth MBDA Business Center. Having succeeded with the preliminary injunction, the three plaintiffs, who are of white descent, expanded the scope of their arguments and sought a declaratory judgment and an injunction that would apply to the MBDA as a whole.

In October 2023, both sides moved for summary judgment. The plaintiffs argued the MBDA’s use of a racial and ethnic presumption is unconstitutional and proper equitable relief would prohibit further unconstitutional conduct on the part of the MBDA by holding unlawful and setting aside any unconstitutional agency actions; i.e., MBDA actions, past and present, based on the racial and ethnic presumption should be undone. In response, the MBDA argued the agency is constitutional because it is designed to remedy past discrimination in which the government “passively participated,” and, notwithstanding those constitutional merits, the plaintiffs lacked standing.

On the issue of standing, and despite that none of the plaintiffs applied for any MBDA program benefits, the court concluded that Bruckner and Nuziard had standing, but not Piper. The court noted that whether a plaintiff met the non-statutory requirements to be classified as “socially or economically disadvantaged” was of no consequence, so long as the plaintiff evidenced a ready and willing intent to apply for MBDA services. On this last point of intent, Bruckner and Nuziard had established standing while Piper failed. Because Bruckner and Nuziard met all MBDA program criteria, save for race, the MBDA’s invasion (i.e., denial of program access) of Bruckner and Nuziard’s protected interests caused, or was causing, an actual or imminent concrete and particularized harm, which a judgment by the court could redress.

With regard to the issue of constitutionality, the court concluded that the presumption of social disadvantage for the statutorily defined minority groups was unconstitutional. The court found that the MBDA’s only compelling interest was in remedying discrimination in government contracting; and the demonstrated instances of private discrimination submitted by MBDA, such as with discrimination in access to credit, failed to provide a direct link to government participation. In addition, the court also found that the MBDA’s presumption was not narrowly tailored because it was both under- and over-inclusive: It excluded businesses owned by disadvantaged individuals from the Middle East, North Africa, and North Asia, while presumptively including firms owned by well-off individuals who fall under one of the statutory minority groups (e.g., Oprah). Finally, the court found the MBDA presumption of social disadvantage failed the flexibility and duration prong, because the MBDA continued to grow rather than adjust in proportion to discriminatory impact over time. Taken together, along with the impact the presumption had on third parties, the court concluded the MBDA was unconstitutional.

Although the plaintiffs sought equitable relief under the APA by having the court set aside the MBDA’s past and present actions as unlawful, the court determined such extreme measures were unnecessary when the permanent injunctive relief would sufficiently redress the plaintiffs’ harm. Instead, the court granted a nationwide injunction that prohibits the MBDA from applying the presumption of social disadvantage in the future.

In granting summary judgment in favor of the plaintiffs, the court concluded with:

The MBDA advertises services exclusively for some races but not others. See 15 U.S.C. § 9501. While not widely advertised, applicants not on the Agency’s list of preferred races can attempt to “adequately show” their “social or economic disadvantage.” 15 C.F.R. § 1400.1(b). To do so, they must overcome the Agency’s presumption that they are not disadvantaged because their race is not listed.

While the Agency may intend to serve listed groups, not punish unlisted groups, the very design of its presumption punishes those who are not presumptively entitled to MBDA benefits.

In our prior case update, we discussed the similarities between the MBDA and the SBA’s 8(a) program. Given the court ruling in Ultima, which found a similar presumption of social disadvantage to be unconstitutional, this ruling in Nuziard is not unexpected. It may also be indicative of how the challenge in Mid-America to the Department of Transportation’s use of a similar rebuttable presumption in its disadvantaged business enterprise program may be resolved.

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