The Oregon legislature set aside millions of dollars of federal COVID-19 relief funding specifically for Black-owned businesses. For Black business owners, this was an acknowledgment of both a history of racial discrimination and the fact that the coronavirus disproportionately affected that community. But others are questioning whether the earmarked funds were themselves a form of discrimination. The resulting lawsuits have tied up $8.8 million that would otherwise be keeping small businesses open and their employees paid.

The Oregon Cares Act Earmarks Funds for Black Businesses

Business owners across the country know how much of a scramble it has been to claim their share of the federal government’s COVID relief funds. That money passed through the state governments and each state’s legislature had a chance to determine how that money would be distributed.

In the Northwest, that took the form of the Oregon Cares Act. The legislation earmarked $62 million of the $1.4 billion the state received in Coronavirus relief funds specifically for grants to Black residents, business owners, and community organizations.

The step came in the wake of data showing that the coronavirus was disproportionately affecting and killing people of color. An open letter to the state legislature, signed by several advocacy groups and legislators, said:

“Black, brown, and Indigenous communities have always been denied the resources we need to be healthy. So, it is absolutely predictable that we are the communities hit hardest by COVID-19—and not just by the virus itself. Nationally, we also know that the CARES Act has already left Black communities behind.”

The letter advocated for targeted investment in the Black community that would recognize and respond to those disproportionate impacts. The Oregon Cares Act did just that.

White and Mexican Business Owners Claim Racial Discrimination

While those who signed the letter found this earmarking necessary, others said it was just another type of racial discrimination. Two lawsuits have been filed claiming that the Oregon Cares Fund was illegal discrimination — treating Black business owners differently because of their race.

The first lawsuit was brought by a white owner of a logging company in John Day called Great Northern Resources. He was later joined by another white business owner of Dynamic Service Fire and Security, an electrical company in Salem. One plaintiff says that even after borrowing $20,000 from the Paycheck Protection Program, he was on the verge of laying off employees unless he got access to the Cares Act funds. The arguments in that lawsuit fall into what is commonly called “reverse discrimination” when a program puts white people at a disadvantage.

The second lawsuit was brought by a Mexican-American woman who owns Revolucion Coffee House in Portland. She posted on social media:

“This lawsuit is not anti-black or anti-Latino. . . . This is not a fight about who is more or less qualified, but a kitchen for our elected officials that the state has to be involved in all its decisions and provide equal opportunities to use the money.”

COVID Relief Becomes the Next Battleground for Affirmative Action Cases

Both lawsuits have found backing from conservative legal advocacy groups. The Great Northern Resources lawsuit is backed by Project on Fair Representation, which has also challenged race-based admissions policies at universities like Harvard. These COVID relief lawsuits provide a new outlet for those who would argue that any decision based on race should be illegal.

The U.S. Supreme Court has said that it isn’t quite that absolute. The government, including a state legislature or school board, is allowed to make race-based distinctions, but only when they are based on a “compelling government interest” and “narrowly tailored” to meet that need. Historically, this has included making up for past racial discrimination. However, more recent court opinions have put less emphasis on this and more attention on other compelling interests including diversity and inclusion.

Lawsuits Tie Up Millions in COVID-19 Relief Funds

The one thing that everyone on both sides of this argument agrees on is that this money needs to go to the businesses struggling to stay open throughout the pandemic. But the nature of prolonged litigation could mean the lawsuits do just the opposite. Rather than giving access to more money, the lawsuits are, at least temporarily, reducing the amount of money in the pot. In response to the lawsuits, the backers of the Oregon Cares Fund said in a statement:

“Pending clarity from the court on the matter of the class, we have decided to temporarily move the remaining $8.8 million in the Fund to the court. . . . We will make the case that supporting Black Oregonians does not automatically mean that everyone else is harmed. That idea is only perpetuating the problem of race in America today.”

No matter how these lawsuits resolve, they will necessarily delay putting money in the hands of business owners, Black or otherwise, who need it most.

At Eisenberg & Baum, LLP, our discrimination attorneys understand the complicated issues behind racial discrimination, for and against Black business owners. If you believe Affirmative Action has improperly worked against you, racial discrimination is making growing your business more difficult, we can help you review your options and protect your rights. Contact Eisenberg & Baum, LLP, today to talk to a discrimination attorney.