By Nate Raymond
(Reuters) - A federal judge in Texas has barred a government agency within the U.S. Department of Commerce tasked with providing assistance to minority-owned businesses from turning away applicants based on race.
U.S. District Judge Mark Pittman, an appointee of Republican former President Donald Trump in Fort Worth, in a Tuesday ruling sided with a group of white entrepreneurs in finding that the Minority Business Development Agency's (MBDA) preferential treatment of non-white entrepreneurs is unconstitutional.
The judge based that conclusion partly on the U.S. Supreme Court's landmark decision in June declaring race-conscious college admissions policies designed to boost enrollment of underrepresented minorities on campus unlawful.
The plaintiffs were told they were ineligible for agency assistance because they were not members of any of the races or ethnicities included on a list of qualified minorities presumed to be disadvantaged and thus entitled to services, according to the judge's summary of the case.
Pittman said that ruling made clear that race-based government action could only be justified under the U.S. Constitution for the limited purpose of addressing specific, identified instances of illegal discrimination.
While Pittman noted that racial minorities have less access to loans, receive less funding when they apply and pay higher interest rates, he said "the record does not show government participation contributed to such disparities."
MBDA attorneys argued that the agency's policies are constitutional because they help rectify past discrimination in which the government played a role, according to background in the judge's decision. But Pittman said such reasoning effectively punishes non-minorities.
"While the agency's work may help alleviate opportunity gaps faced by (minority business entrepreneurs), two wrongs do not make a right," Pittman wrote. "And the MBDA's racial presumption is a wrong."
He issued an injunction barring the agency from considering or using an applicant’s race or ethnicity in determining whether he or she could receive assistance from the MBDA.
The U.S. Department of Justice, which defended the agency in court, declined to comment.
The agency was established in 1969 by executive order during Republican President Richard Nixon's administration and helps minority-owned businesses access capital, government contracts and market opportunities.
President Joe Biden's signature Infrastructure Investment and Jobs Act in 2021 for the first time established it as a permanent agency by statute.
Two years later, a conservative legal group sued arguing the agency violates the U.S. Constitution's 5th and 14th Amendments by infringing white business owners' equal protection rights.
Pittman, in a 93-page opinion, agreed, saying the law establishing the agency unconstitutionally treated white business owners differently because of their race.
He said those business owners were excluded from the agency's "magic list" of racial or ethnic minority groups the agency presumes are entitled to services, including Black, Hispanic, Native American, Asians and Pacific Islanders.
"To the extent the MBDA offers services pursuant to an unconstitutional presumption, that’s fifty-five years too many," Pittman wrote. "Today the clock runs out."
Rick Esenberg, the president of the conservative Wisconsin Institute for Law & Liberty, which represented the white business owners, in a statement said the ruling "declared what we know is the law and the right thing: the government may not discriminate based on race."
(This story has been refiled to add a dropped word to paragraph 6)