SBA Program for Disadvantaged Businesses Upheld

A U.S. Small Business Administration (SBA) program for businesses owned by socially and economically disadvantaged individuals has survived a constitutional challenge. The 4th U.S. Circuit Court of Appeals ruled that plaintiff, who is a disabled veteran and is of Scottish and German descent, lacked standing, which is the legal principle requiring a party to demonstrate a sufficient connection to and harm from the law or action being challenged to bring a lawsuit in court. The plaintiff alleged the SBA’s Section 8(a) Business Development Program discriminated against him based on race, as it presumes certain nonwhite races are socially disadvantaged. However, the program requires applicants to be both socially and economically disadvantaged, and the plaintiff could not demonstrate economic disadvantage. The 4th Circuit also reversed the lower court’s finding that the case was moot due to a Tennessee federal court blocking the SBA from using race-based social disadvantage criteria, as the Tennessee decision has not resulted in a final judgment.