REMEDYING DISCRIMINATION IN AGRICULTURAL LENDING: ANALYZING THE LEGAL CHALLENGES FACING THE EMERGENCY RELIEF FOR FARMERS OF COLOR ACT

By: Jackie Cuellar, Volume 106 Staff Member

To alleviate the impact of the COVID-19 pandemic on the United States’ economy, Congress passed the American Rescue Plan Act of 2021 (ARPA).[1] Section 1005 of the ARPA, also referred to as the Emergency Relief for Farmers of Color Act, is a historic provision that allocates $4 billion to the United States Department of Agriculture (USDA) to provide debt relief to socially disadvantaged farmers and ranchers.[2] However, Section 1005 was quickly met with over a dozen lawsuits arguing that the program is unconstitutionally discriminatory against White farmers.[3] Several federal district courts granted preliminary injunctions, preventing the distribution of any debt relief payments.[4]

There is a clear record of discrimination against farmers of color in USDA loan programs, as well as substantial evidence that the COVID-19 pandemic has disproportionately impacted farmers of color.[5] Under specific circumstances—namely, in order to remedy discrimination where race-neutral provisions have otherwise failed[6]—the Supreme Court has clear precedent that race-conscious measures may be implemented.[7] Thus, these courts should vacate the injunctions and allow the debt payment program to resume.

I. HISTORICAL AND ONGOING DISCRIMINATION IN USDA LOAN PROGRAMS, DISPARATE IMPACTS OF COVID-19, AND THE NEED FOR SECTION 1005

The share of Black farmers in the US has fallen from its peak of nearly 15% in 1920[8] to less than 2% of agricultural operators today.[9] This dramatic decline in the number of Black agricultural producers is largely attributed to federal farm policies that excluded non-White farmers from USDA programming and benefits.[10] In particular, USDA has a long and well-established history of discriminatory lending practices against Black farmers as well as other minority groups.[11] Decades of discrimination continue to adversely impact farmers of color.[12] For example, on average, farms operated by Black producers are smaller and generate significantly less income than their White counterparts.[13] Farmers of color unfairly denied USDA loans have also been unable to invest in additional land, equipment, and other improvements to expand their agricultural operations and improve their profitability.[14] Furthermore, disparate treatment and discriminatory lending practices have persisted to this day—in 2021, USDA rejected direct loan applications from 42% of Black farmers compared to just 9% of White farmers.[15] Also, despite accounting for 5% of all US farmers, farmers of color received less than 1% of the financial assistance for agricultural producers distributed in response to the COVID-19 pandemic.[16]

II. LEGAL CHALLENGES FACING SECTION 1005 AND THE LEGAL PATH TOWARDS RACIAL EQUITY IN AGRICULTURE

A strong, diverse agricultural sector is critical to the US food supply, rural economic development, and national security.[17] Further, addressing racial inequities in agriculture benefits not only those who have been historically underserved but all of us as closing racial gaps benefits the economy,[18] fosters innovation,[19] and advances justice. Thus, in order to promote equity in agriculture and support farmers of color, the extraordinarily detrimental impacts of decades of discrimination and systemic racism must be remedied.

Section 1005 of the ARPA directs USDA to provide direct payments of up to 120% of outstanding USDA loan debt­.[20] Importantly, this debt relief is available only to “socially disadvantaged” producers, defined as a member of a group subjected to racial or ethnic prejudices[21] such as: Black/African American, American Indian, Alaskan Native, Hispanic/Latino, Asian American, or Pacific Islander farmers and ranchers.[22]

Section 1005 intends “to increase opportunity, advance equity, and address systemic discrimination in USDA programs.”[23] The debt relief program is expected to benefit over 17,000 socially disadvantaged producers.[24] Given the substantial evidence of racially biased lending practices and the exclusion of minority farmers in vital USDA programs,[25] Section 1005 is a critical step towards remedying the adverse impacts of decades of discrimination.[26] However, over a dozen lawsuits alleging that Section 1005 is violative of the Fifth Amendment’s Equal Protection Clause of the Constitution have been filed since its passage.[27] To date, three federal courts have issued preliminary injunctions in Texas,[28] Florida,[29] and Tennessee, [30] preventing USDA from issuing any debt payments authorized under Section 1005. Most recently, plaintiffs in the Southern District of Illinois filed a motion for summary judgment also asking the court for an injunction.[31]

Granting these injunctions is misguided and ignores both constitutional history and the reality that historical and ongoing discrimination by USDA continues to perpetuate racial disparities in agricultural profitability and tenure. For example, in Wynn v. Vilsack, the judge questioned whether the government had a compelling government interest that warranted the use of a race-based remedial action.[32] Ultimately, the judge granted the preliminary injunction, explaining that the plaintiff “established a strong likelihood of showing that Section 1005 violates his right to equal protection under the law because it is not narrowly tailored to remedy a compelling governmental interest.”[33]

However, drawing on precedent set forth in past affirmative action and racial gerrymandering cases, the Supreme Court has made clear that “[r]ace-based action necessary to further a compelling governmental interest does not violate the Equal Protection Clause so long as it is narrowly tailored to further that interest,”[34] and that “remedying the effects of past or present racial discrimination” is indeed a compelling government interest.[35] Although these cases are not perfectly analogous to the implementation of Section 1005, they nevertheless provide an applicable framework for evaluating whether race-conscious measures designed to remedy past discrimination are constitutional.

Section 1005 is in furtherance of a compelling government interest as it seeks to remedy both past discrimination in USDA program administration as well as the disparate impact of the COVID-19 pandemic on socially disadvantaged farmers. Additionally, Section 1005 is sufficiently narrowly tailored because it will benefit the farmers historically most impacted by USDA discrimination and will deliver the type of rapid relief necessary in light of the pandemic.[36] Importantly, USDA has also previously implemented race-neutral reforms that have been insufficient to address the continuing harm of past and present discrimination.[37] Given this inefficacy, alongside the urgent need to implement the debt relief program to combat the effects of COVID-19, Section 1005 is indeed the least restrictive means to achieve Congress’s goals of remedying historic and ongoing discrimination and does not violate the Constitution.[38] Therefore, the injunctions that have stymied Section 1005 must be vacated. By allowing USDA to implement the debt relief initiative, we will begin to remedy the long history of discrimination against minority farmers in USDA loan programs its adverse impacts and disparities that continue to persist between minority and non-minority farmers today.[39]

 

[1] American Rescue Plan Act of 2021, H.R. 1319, 117th Cong. § 2001 (2021).

[2] In Historic Move, USDA to Begin Loan Payments to Socially Disadvantaged Borrowers Under American Rescue Plan Act Section 1005, USDA (May 21, 2021), https://www.usda.gov/media/press-releases/2021/05/21/historic-move-usda-begin-loan-payments-socially-disadvantaged [https://perma.cc/UK7S-WCB4] [hereinafter USDA Loan Payments].

[3] Jena Brooker, Congress Promised Debt Relief to Farmers of Color. They Might Not Get It., Grist (Oct. 4, 2021),https://grist.org/agriculture/congress-promised-debt-relief-to-farmers-of-color-they-might-not-get-it [https://perma.cc/9E5K-RMP5].

[4] American Rescue Plan Debt Payments, USDA, https://www.farmers.gov/loans/american-rescue-plan [https://perma.cc/YA73-6CT2]. Three preliminary injunctions were issued in July 2021 in Texas and Florida as well as a temporary restraining order in Wisconsin. Emily Ashcraft, Another Preliminary Injunction Granted Against “Discriminatory” USDA Loan Forgiveness Program, Law Street (July 6, 2021), https://lawstreetmedia.com/news/agriculture/another-preliminary-injunction-granted-against-discriminatory-usda-loan-forgiveness-program [https://perma.cc/LC7U-F7HR].

[5] Brief of Amici Curiae, The Rural Coalition et al. in Opposition to Plaintiffs’ Motion for Preliminary Injunction at 14, Miller v. Vilsack, No. 4:21-cv-00595-O, 2021 WL 6129207 (N.D. Tex. July 1, 2021), ECF No. 57.

[6] See Grutter v. Bollinger, 539 U.S. 306, 339 (2003); see also City of Richmond v. J.A. Croson Co., 488 U.S. 469, 550 (1989) (Marshall, J., dissenting) (noting that race-neutral measures need not be employed where they have previously been found “ineffectual in eradicating the effects of past discrimination”).

[7] Brief of Amici Curiae, The Rural Coalition et al. in Opposition to Plaintiffs’ Motion for Preliminary Injunction at 2–5, Miller v. Vilsack, No. 4:21-cv-00595-O, 2021 WL 6129207 (N.D. Tex. July 1, 2021), ECF No. 57.

[8] Bruce J. Reynolds, Black Farmers in America, 1865-2000, USDA 4 (Oct. 2003), https://www.rd.usda.gov/files/RR194.pdf [https://perma.cc/X87Y-QD33].

[9] 2017 Census of Agriculture Highlights: Farm Producers, USDA (Apr. 2019), https://www.nass.usda.gov/Publications/Highlights/2019/2017Census_Farm_Producers.pdf [https://perma.cc/9WD3-WAUW].

[10] See generally Civil Rights at the United States Department of Agriculture, Civ. Rts. Action Team (Feb. 1997), https://acresofancestry.org/wp-content/uploads/2021/01/CRAT-Report-.pdf [https://perma.cc/GL7A-AYJF] (describing the decades of documented discrimination resulting in loss of farmland and income) [hereinafter CRAT Report]; Civil Rights Assessment, Jackson Lewis LLP (Mar. 31, 2021), https://www.coalition4change.org/USDA%20jackson.pdf [https://perma.cc/TMS5-9389] (substantiating accounts by socially disadvantaged farmers describing discrimination and unfair treatment by Farm Service Agency (FSA) employees, and noting that USDA had even been called “the last plantation”).

[11] See, e.g., Jackson Lewis LLP, supra note 10 at 62, 390 (finding “substantiated claims of denial of equal program access and continuing institutional discrimination” at USDA and “abuse and discrimination in loan processing”); The Decline of Black Farming in America, Comm’n on Civ. Rts. 69 (Feb. 1982), https://files.eric.ed.gov/fulltext/ED222604.pdf [https://perma.cc/EU3H-STH3] (finding that “racial discrimination in credit . . . has resulted in smaller and less productive landholdings” for Black farmers).

[12] Megan Horst & Amy Marion, Racial, Ethnic and Gender Inequities in Farmland Ownership and Farming in the U.S., 36 Agric. & Hum. Values 1, 5 (2019).

[13] Id.

[14] U.S. Gov’t Accountability Off., GAO-19-539, Agricultural Lending: Information on Credit and Outreach to Socially Disadvantaged Farmers and Ranchers Is Limited 29 (July 2019), https://www.gao.gov/assets/gao-19-539.pdf [https://perma.cc/2587-7BE3].

[15] See Chandelis Duster & Janie Boschma, Many Black Farmers Nationwide Struggling to Keep Their Farms Afloat as They Face Disparities Across the Board, CNN (Dec. 15, 2021), https://www.cnn.com/2021/12/15/politics/black-farmers-debt-relief-disparities/index.html [https://perma.cc/6TDB-EP7V]; see also Emma Scott, Emily Broad Leib, Nathan Rosenberg, Ava Cilia, Merve Ciplak & Quinton Robinson, Supporting Civil Rights at USDA: Opportunities to Reform the USDA Office of the Assistant Secretary for Civil Rights, Harv. L. Sch. Food L. & Pol’y Clinic (Apr. 2021), https://chlpi.org/wp-content/uploads/2013/12/FLPC_OASCR-Issue-Brief.pdf [https://perma.cc/2GG7-B8JF]; Ximena Bustillo, ‘Rampant Issues’: Black Farmers Are Still Left Out at USDA, Politico (July 5, 2021), https://www.politico.com/news/2021/07/05/black-farmers-left-out-usda-497876 [https://perma.cc/DL5X-9E2R] (finding that in 2020, USDA granted loans to 37% of Black loan applicants compared to 71% of White applicants).

[16] Bustillo, supra note 15; Laura Reiley, Agriculture Secretary Tom Vilsack Says Only 0.1 Percent of Trump Administration’s Covid Farm Relief Went to Black Farmers, Wash. Post (Mar. 25, 2021), https://www.washingtonpost.com/business/2021/03/25/vilsack-interview-usda-rescue-plan [https://perma.cc/L6H6-B6ZZ].

[17] See generally Katherine W. Phillips, How Diversity Makes Us Smarter, Greater Good Mag. (Sept. 18, 2017), https://greatergood.berkeley.edu/article/item/how_diversity_makes_us_smarter [https://perma.cc/RP4C-92W9] (“[I]f you want to build teams or organizations capable of innovating, you need diversity.”).

[18] See, e.g., Exec. Order. No. 13985, 86 Fed. Reg. 7009 (Jan. 25, 2021) (“[C]losing racial gaps . . . would amount to an additional $5 trillion in gross domestic product in the American economy over the next 5 years.”).

[19] See Phillips, supra note 17; Nancy DiTomaso, Corinne Post & Rochelle Parks-Yancy, Workforce Diversity and Inequality: Power, Status, and Numbers, 33 Ann. Rev. Socio. 473, 488 (2007).

[20] American Rescue Plan Debt Payments, supra note 4. Debt payments cover 100% of loan balances and 20% is offered to put towards tax liability and other fees associated with the loan forgiveness. Id.

[21] Notice of Funds Availability; American Rescue Plan Act of 2021 Section 1005 Loan Payment (ARPA), 86 Fed. Reg. 28,329, 28,329 (May 26, 2021).

[22] See USDA Loan Payments, supra note 2.

[23] Id. (quoting Tom Vilsack, Secretary of Agriculture).

[24] Safiya Charles, After a Last-Ditch Lawsuit Is Filed in Texas, Black Farmers Wait to Learn the Fate of USDA’s Imperiled Debt Relief Program, Counter (Oct. 26, 2021), https://thecounter.org/lawsuit-miller-versus-vilsack-texas-Black-farmers-usda-debt-relief [https://perma.cc/ZX49-4DWD].

[25] See generally Timeline: Black Farmers and the USDA, 1920 to Present, Env’t Working Grp.,https://www.ewg.org/research/Black-farmer-usda-timeline [https://perma.cc/5GPE-5EJ2]; Nathan Rosenberg & Bryce Wilson Stucki, How USDA Distorted Data to Conceal Decades of Discrimination Against Black Farmers, Counter (June 26, 2019), https://thecounter.org/usda-Black-farmers-discrimination-tom-vilsack-reparations-civil-rights [https://perma.cc/S9X4-36EZ].

[26] Expert Report of Alicia M. Robb, Ph.D. at 5, Kent v. Vilsack, No. 3:21-cv-00540-NJR, 2021 WL 6139523 (S.D. Ill. 2022), ECF No. 48-7.

[27] Victoria McKenzie, Fla. Farm Aid Discrimination Suit On Hold Amid Texas Case, Law360 (Dec. 7, 2021), https://www.law360.com/articles/1446452/fla-farm-aid-discrimination-suit-on-hold-amid-texas-case [https://perma.cc/YVB5-TASJ]; see, e.g., Faust v. Vilsack, 519 F. Supp. 3d 470 (E.D. Wis. 2021).

[28] Miller v. Vilsack, No. 4:21-cv-00595-O, 2021 WL 6129207 (N.D. Tex. Dec. 8, 2021).

[29] Wynn v. Vilsack, 545 F. Supp. 3d 1271 (M.D. Fla. 2021).

[30] Holman v. Vilsack, No. 21-01085-STA-jay, 2021 WL 2877915 (W.D. Tenn. July 8, 2021).

[31] Kent v. Vilsack, No. 3:21-cv-00540-NJR, 2021 WL 6139523 (S.D. Ill. 2022).

[32] Wynn v. Vilsack, No. 3:21-CV-514-MMH-JRK, 2021 WL 2580678, at *6 (M.D. Fla. June 23, 2021).

[33] Id. at *12.

[34] Grutter v. Bollinger, 539 U.S. 306, 308 (2003).

[35] Shaw v. Hunt, 517 U.S. 899, 909 (1996).

[36] See Brief of Amici Curiae, The Rural Coalition et al. in Opposition to Plaintiffs’ Motion for Preliminary Injunction at 14, Miller v. Vilsack, No. 4:21-cv-00595-O, 2021 WL 6129207 (N.D. Tex. July 1, 2021), ECF No. 57.

[37] Id. at 9–10.

[38] Id. at 9, 14.

[39] See generally Expert Report of Alicia M. Robb, Ph.D. at 1, Kent v. Vilsack, No. 3:21-cv-00540-NJR, 2021 WL 6139523 (S.D. Ill. 2022), ECF No. 48-7.