Trial Commences Questioning Legality of Oregon COVID-19 Fund Limiting Grants Based on Race

On January 5, the District of Oregon will hear oral arguments in a lawsuit brought by small businesses in Oregon who question the legality of an Oregon State COVID-19 relief fund which limits grants “to Black individuals, Black-owned businesses, and Black-led nonprofit organizations who have experienced financial adversity due to COVID-19.” The plaintiffs allege that the  $62,000,000 grant fund, known as the Oregon Cares Fund for Black Relief and Resiliency, violates the Equal Protection Clause (EPC) of the Fourteenth Amendment as it excludes applicants who do not “self identify as Black.” 

The initial complaint was filed at the end of October 2020 against the State of Oregon and the nonprofit overseeing the dissemination of the grant funds. In the original pleading, the plaintiff —then just a single logging company in eastern Oregon— averred that the EPC bars all government grant programs that exclude applicants based on race if the fund could only tie the race-based exclusion to an attempt to remedy past instances of racial discrimination. The plaintiff wrote that the EPC “requires the government to identify discrimination with specificity, have actual evidence of discrimination that demonstrates race-based action is necessary, and tailor any race-conscious action to that discrimination.” The plaintiff initially sought a preliminary injunction requiring the defendants to consider the plaintiff’s grant application without considerations of race or place with the court the amount of funds to which the plaintiff asserted entitlement, but for the business’s exclusion from the grant program due to the owner’s race. The logging company proffered that irreparable harm could be found in the grant program’s requirement that all funds be disseminated by the mandated end date of December 31, 2020. 

In a brief replying to the plaintiff’s motion for a preliminary injunction, the defendants summarily argued that a preliminary injunction stood as no longer appropriate on grounds that the plaintiff lacked irreparable harm. Specifically, the State of Oregon asserted that the defendants had previously placed with the court a bond equivalent to the amount of grant funds the plaintiff would receive, should it be successful on the merits of its intended case. Irreparable harm, the defendants concluded, required a showing of “future injury,” which the court-provided funds made moot. In this brief, albeit in passing, the defendants also noted that the fund was not designed to simply alleviate generalized assertions of past discrimination, but rather was put in place given that during the COVID-19 pandemic “ostensibly race neutral government aid was not reaching Black Oregonians in proportion to their suffering.”

The District of Oregon denied the plaintiff’s first motion for a preliminary injunction. The court ruled that the defendants’ depositing of the grant funds with the court removed the “continuing, present adverse effects” necessary for the issuance of any preliminary injunction. The court also explained that the mere continued existence of an alleged constitutional violation does not, in itself, satisfy the irreparable harm requirement. 

Following the denial of the earliest sought preliminary injunction, the original plaintiff  and others filed an amended complaint continuing to allege that the grant application’s race requirement violated the EPC, but also seeking to now expand the proffered EPC violations to a class of all eligible grant applicants who were solely to be denied grant funds due to race. The amended complaint additionally claimed that the “race-based program” violated Title VI of the Civil Rights Act of 1964, given that the monies for the Oregon fund originated from the federal government. The altered pleadings now sought a declaratory judgment that the defendants’ restriction of “government benefits to those who ‘self identify as black’” was a violation of the EPC and Title VI and a “preliminary and permanent injunction prohibiting the defendants…from using race as a factor in distributing (COVID-19) relief funds allocated to the state by the federal government….” Additionally, the plaintiffs sought attorney’s fees and damages for all putative class members. 

The district court has now ordered the roughly $8,800,000 in remaining funds from the Oregon Cares Fund to be placed in escrow, pending final resolution of the merits of the case. Prior to the upcoming oral arguments on Tuesday, the court mandated that all parties brief the court on the question of whether the now expired fund foreclosed putative class members, who have yet to apply for grant funds, from judicial relief. In the requested brief, the defendants argued that the district court could not rewrite the federal law that funded the grant program, which required all unused funds by the state to be returned to the federal government, thus making the plaintiffs’ case moot. The plaintiffs asserted that the filing of the amended complaint prior to the closure of the grant program allowed the district court to use its authority to grant equitable relief to disseminate the funds in escrow, if relevant, following a review of the merits of the case. 

The plaintiffs are represented by Murphy & Buchal, Mitchell Law, and the Benbrook Law Group. The defendants are represented by Snell & Wilmer, Keating Jones Hughes, and Schwabe, Williamson and Wyatt.