Late Tuesday, a Colorado judge issued a Temporary Restraining Order (TRO) against the state for distributing COVID-19 relief payments based on the applicant’s race. The TRO, signed by U.S. District Judge William J. Martinez, follows a class-action lawsuit filed Oct. 7 by small business owner Steve Collins against the state to stop its racially motivated distribution of pandemic relief funds provided by Colorado’s COVID-19 pandemic relief program. Collins’ attorney Wen Fa remarked:

“Colorado cannot use racial preferences to grant COVID-19 relief.”

Initially passed by the Colorado General Assembly and signed by the Governor in Dec. 2020, Senate Bill 20B-001 allocated $4 million in COVID relief payments to “minority-owned businesses.” In Jan. 2021, after a small business owner filed a lawsuit challenging the “race-based” program, the General Assembly enacted an amended law, Senate Bill 21-001, to include “disproportionately impacted businesses.” The original relief bill (SB 20B-001) directed funds to the Colorado Minority Business Office. SB 20-001, signed by Democratic Gov. Jared Polis on Jan. 21, instead instructed that the Colorado Office of Economic Development and International Trade (OEDIT) manage the funds. 

Despite the amended bill, Collins, owner of the event planning business, Resort Meeting Source, alleges in his lawsuit that SB 21-001, which provides relief payments, grants, loans, and technical support to applicable businesses: 

“Continues to provide a racial preference to businesses that are minority-owned in two ways. First, among all disproportionately impacted businesses, SB 21-001 gives a mandatory preference to minority-owned businesses. Second, a business that is not minority-owned cannot qualify as a “disproportionately impacted business” unless it shows that it can meet one of the other criteria in the bill, such as having five or fewer employees or being located in an economically distressed area. In contrast, minority-owned businesses automatically qualify as disproportionately impacted businesses.”

According to the lawsuit, which lists both Collins and Resort Meeting Source as plaintiffs, over the past 18 months, Resort Meeting Service has suffered revenue losses due to the pandemic. With two major events canceled in 2021—resulting in revenue losses of nearly $26,000—Collins applied for a grant from Colorado’s Disproportionately Impacted Business Grant Program (DIB) governed by OEDIT.

SB 21-001 appropriates money for “Relief payments to disproportionately impacted businesses that have been most impacted by COVID-19 and have lacked meaningful access to federal loans and grants under the CARES Act.” To be defined as a “disproportionately impacted business,” at least one of seven criteria must be met:

    1. Has five or fewer employees, including the business owner;
    2. Is a minority-owned business;
    3. Is located in an economically distressed area;
    4. The business owner lives in an economically distressed area;
    5. The business owner has low or moderate income, as determined by the Office of Economic Development based on the United States Department of Housing and Urban Development’s low- and moderate-income data used in the community development block grant program;
    6. The business owner has low or moderate personal wealth, based on household net worth as determined by the office, applying relevant federal or state data; or
    7. The business owner has had diminished opportunities to access capital or credit.
Wen Fa, Attorney, Pacific Legal Foundation

Attorney Wen Fa of Pacific Legal Foundation (PLF), who is representing Collins pro-bono, says Collins—who is white—is less likely to obtain relief because the program establishes a preference for minority-owned businesses. The lawsuit points out that under SB 21-001, a minority-owned business qualifies as a disproportionately impacted business regardless of whether it meets any of the other six criteria.

Indeed, to be eligible for the grant, an applicant must show that a business applying for the grant: (1) was in existence as of Jan. 1, 2020; (2) is still in operation in Colorado; (3) has at least one full-time employee, which can be the business owner; (4) show at least 20% income loss since Mar. 26, 2020 (compared to the prior year) as a result of the COVID-19 pandemic; and (5) received less than $20,000 in federal or state loans and grants under the CARES Act. Once the eligibility requirements are met, businesses seeking to obtain grants under the DIB program must meet at least one of the seven criteria listed above that defines a “disproportionately impacted business,” including number 2, “Is a minority-owned business.”

According to Collins’ lawsuit, the Colorado Enterprise Fund’s application page requires applicants to identify whether the business applying for the DIB grant is minority-owned. The application page states:

“Minority, women, or veteran-owned businesses” will be “prioritized but not the exclusive recipients of assistance.”

In the rarely-granted TRO ruling, Judge Martinez points out, “A party seeking a temporary restraining order or preliminary injunction must show: (1) a substantial likelihood that the movant eventually will prevail on the merits; (2) that the movant will suffer irreparable injury unless the injunction issues; (3) that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) that the injunction, if issued, would not be adverse to the public interest.

Screenshot / Colorado Office of Economic Development & International Trade

Judge Martinez highlighted further in his 11-page order that Federal Rule 65(b) allows the Court to issue a TRO if (a) “specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition”; and (b) “the movant’s attorney certifies in writing any efforts made to give notice and the reasons why it should not be required.”

In issuing the TRO, which will remain in effect until 11:59 p.m. on Oct. 26 unless extended by the court for good cause, Martinez, an Obama-appointed judge, found a substantial likelihood of success on the merits of Collins’ case. He wrote that because the challenged statutory provisions include race classifications, they are subject to stringent scrutiny. Based on the very limited record currently before the Court, Martinez declared it could not conclude that the statute will survive strict scrutiny, adding:

“As such, Plaintiffs have demonstrated a substantial likelihood of success on the merits. To be clear, the Court is not prejudging the content of Defendant’s response or the evidence he will provide in response to the Motion, but given the fast-approaching deadline for the OEDIT to award grants, the Court finds that the interests of justice are best served through the immediate issuance of a TRO to preserve the status quo ante.”

As PLF attorney Wen Fa stated on the non-profit organization’s website when announcing the case, “Colorado cannot use racial preferences to grant COVID-19 relief. Equality before the law is a vital part of the Constitution, and discriminating against individuals based on arbitrary classifications like race is always wrong.” He continued, telling The Epoch Times:

“We’re not challenging that the program gives relief and grants to small businesses. We’re challenging the fact that the program provides for a minority-owned business preference in doing so.”