Is Small Business Administration liable for disparate impact against minority businesses?

Recently, Diamond Ventures,LLC a venture capital Atlanta based firm received a ruling from a Federal District Judge to go forward with their landmark lawsuit. The case was brought under the Equal Credit Opportunity Act ("ECOA"), Plaintiff, Diamond
Ventures, LLC (“Diamond”), claims that the Small Business Administration ("SBA") discriminated against it as a minority-owned company when it failed to license it as a Small Business Investment Company ("SBIC"). Earl Peek on June 30, 2003 filed pro se but amended the complaint in December 2003 to change the plaintiff to Diamond Ventures, LLC alleging bias practices in SBA selection process.

On March 29, 2010, Federal District Court Judge Glady Kessler, ruled against the SBA’s attempt to dismiss Diamond’s landmark lawsuit against the SBA, setting the stage for the agency to stand trial for discriminatory practices in its Small Business Investment Company (SBIC) program. The Judge found credible testimony and reports that the program had:

* only .86% (two persons) of the 350 licensed managers in the program who were African-American managers;
* that SBA’s own statistics show black owned firms received just 2.55% of SBA approved financing;
* that .49% of all SBA dollars were to black owned firms illustrating that SBA’s policies for decades have had a disparate discriminatory impact on blacks and minorities.


The Court in denying SBA summary judgment request found genuine issues of material fact exist with regard to Plaintiff’s disparate impact claim and that Plaintiff has offered sufficient evidence from which a reasonable jury could conclude that Defendant is liable for disparate impact discrimination on the basis of race.