Sorry for the long post. But this decision out of Texas has potential to overturn many diverse business and civil rights programs.
The over inclusive/over inclusive. Well - those categories come from who the US government has historically deemed white.
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Please find attached and selected portions below regarding the Order and Opinion just issued (June 5, 2023) by the federal district court in Texas (N.D. Fort Worth Division) in the Nuziard v. MBDA case. The district court granted the Plaintiffs’ Motion for Preliminary Injunction and issued an Injunction regarding the services performed by the MBDA.
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
JEFFREY NUZIARD ET AL.,
Plaintiffs,
v.
No. 4:23-CV-0278-P
MINORITY BUSINESS DEVELOPMENT AGENCY ET AL., Defendants.
ORDER AND OPINION
The Constitution demands equal treatment under the law. Any racial classification subjecting a person to unequal treatment is subject to strict scrutiny. To withstand such scrutiny, the government must show that the racial classification is narrowly tailored to a compelling government interest. In this case, the Minority Business Development Agency’s business center program provides services to certain races and ethnicities but not to others. Because the Government has not shown that doing so is narrowly tailored to a compelling government interest, it is preliminary enjoined from providing unequal treatment to Plaintiffs.
a. Defendants Lack a Compelling Interest
Defendants contend that it has a compelling interest in remedying the effects of past discrimination faced by minority-owned businesses. ECF No. 20 at 17.
The government may establish a compelling interest in remedying racial discrimination if three criteria are met: “(1) the policy must target a specific episode of past discrimination, not simply relying on generalized assertions of past discrimination in an industry; (2) there must be evidence of past intentional discrimination, not simply statistical disparities; and (3) the government must have participated in the past discrimination it now seeks to remedy.” Miller v. Vilsack, No. 4:21-CV-0595-O, 2021 WL 11115194, at *8 (N.D. Tex. July 1, 2021) (O’Connor, J.) (citing Vitolo v. Guzman, 999 F.3d 353, 361 (6th Cir. 2021) (summarizing U.S. Supreme Court precedents)). The Government’s asserted compelling interest meets none of these requirements.
First, the Government “points generally to societal discrimination against minority business owners.” Vitolo, 999 F.3d at 361. Defendants point to congressional testimony on the effects of redlining, the G.I. Bill, and Jim Crow laws on black wealth accumulation as evidence of a specific episode of discrimination. But the Program does not target black wealth accumulation. It targets some minority business owners. Defendants also identify no specific episode of discrimination for any of the other preferred races or ethnicities. Instead, they point to the effects of societal discrimination on minority business owners. But ''an effort to alleviate the effects of societal discrimination is not a compelling interest." Shaw v. Hunt, 517 U.S. 899, 909-10 (1996).
Second, the Government fails to offer evidence of past intentional discrimination. The Government offers no evidence of discrimination faced by some preferred races and ethnicities. And for those it does, the Government relies on studies showing broad statistical disparities with business loans, supply chain networks, and contracting among some minorities. These studies do not involve all of Defendants’ preferred minorities or every type of business. But even if they did, “statistical disparities don’t cut it.” Vitolo, 999 F.3d at 361. Because “when it comes to general social disparities, there are simply too many variables to support inferences of intentional discrimination.” Id. at 362. “While the Court is mindful of these statistical disparities and expert conclusions based on those disparities, ‘[d]efining these sorts of injuries as ‘identified discrimination’ would give . . . governments license to create a patchwork of racial preferences based on statistical generalizations about any particular field of endeavor.’” Greer’s Ranch Cafe, 540 F. Supp. 3d at 650 (quoting City of Richmond v. J.A. Croson Co., 488 U.S. 469, 499 (1989)).
Third, the Government “has not shown that it participated in the discrimination it seeks to remedy.” Vitolo, 999 F.3d at 361. The government can show that it participated in the discrimination it seeks to remedy either actively or passively. See Croson, 488 U.S. at 492; Vitolo, 999 F.3d at 361.
Defendants, however, provide no argument on how they participated in the discrimination it seeks to remedy. Perhaps the argument could be made that the Government passively discriminated by failing to address the economic inequities among minority business owners. But to be a passive participant, it must be a participant. See Croson, 488 U.S. at 492 (government awarding contracts to those who engaged in private discrimination). And there’s no evidence that the Government passively participated by “financ[ing] the evil of private prejudice” faced by minority-owned businesses. Id.
In sum, the Government has failed to show that the Program targets a specific episode of discrimination, offer evidence of past intentional discrimination, or explain how it participated in discrimination against minority business owners. The Government thus lacks a compelling interest in remedying the effects of past discrimination faced by some minority-owned businesses.
b. The Program is not Narrowly Tailored
Even if the Government had shown a compelling state interest in remedying some specific episode of discrimination, the Program is not narrowly tailored to further that interest for at least two reasons.
First, the Government has not shown that “less sweeping alternatives-particularly race neutral-ones-have been considered and tried.” Walker, 169 F.3d at 983 (cleaned up). This requires the government to show that "no workable race-neutral alternative’’ would achieve the compelling interest. Fisher v. Univ. of Tex. at Austin, 570 U.S. 297, 312 (2013).
Defendants contend that “absent race-based remedies, ‘the needle did not move’ in efforts to remedy the effects of discrimination on the success outcomes of minority business owners.” ECF No. 20 at 22. To support this statement, Defendants rely on a single review of various disparity studies. See U.S. Dep’t of Commerce, Minority Business Development Agency, Contracting Barriers and Factors Affecting Minority Business Enterprise: A Review of Existing Disparity Studies (Dec. 2016).
But this review cuts against the Government. It “emphasize[s] the need for both race-neutral and race-conscious remedial efforts” to move the needle and states that the disparity studies “fail to detail the extent to which agencies have actually implemented and measured the success or failure of these recommendations.” Id. at 70. Thus, the review of contracting disparities Defendants rely on does not show that race-neutral alternatives “have been considered and tried.” See Walker, 169 F.3d at 983. Nor has the Government shown a “serious, good faith consideration of workable race-neutral alternatives” in any other business context. See Grutter v. Bollinger, 539 U.S. 306, 339 (2003).
Second, the Program is not narrowly tailored because it is underinclusive and overinclusive in its use of racial and ethnic classification. See Croson, 488 U.S. at 507-08; Gratz, 539 U.S. at 273-75. It is underinclusive because it arbitrarily excludes many minority-owned business owners-such as those from the Middle East, North Africa, and North Asia. For example, it excludes those who trace their ancestry to Afghanistan, Iran, Iraq, and Libya. But it includes those from China, Japan, Pakistan, and India.2 The Program is also underinclusive because it excludes every minority business owner who owns less than 51% of their business. “This scattershot approach does not conform to the narrow tailoring strict scrutiny requires.” Vitolo, 999 F.3d at 364.
The Program is also overinclusive. It helps individuals who may have never been discriminated against. See Croson, 488 U.S. at 506-08 (holding that a minority business plan is overinclusive because it includes ethnicities in which there is no evidence of discrimination). It also helps all business owners, not just those in which disparities have been shown.
The Program is thus not narrowly tailored to the Government’s asserted interest.
Because the Government has not shown a compelling interest or a narrowly tailored remedy under strict scrutiny, Plaintiffs are likely to succeed on the merits.
CONCLUSION
The Court thus GRANTS Plaintiffs’ Motion for Preliminary Injunction (ECF No. 14) and ENJOINS Defendants, the Wisconsin MDBA Business Center, the Orlando MBDA Business Center, the Dallas-Fort Worth MBDA Business Center, and the officers, agents, servants, and employees, and anyone acting in active concert or participation with them 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 against Plaintiffs or otherwise considering or using Plaintiffs’ race or ethnicity in determining whether they can receive access to the Center’s services and benefits.
SO ORDERED on this 5th day of June 2023.
Mark T. Pittman
UNITED STATES DISTRICT JUDGE
