CDFI Case
CDFI Case
The Global Black Economic Forum is proud to serve as counsel to the Freedom Economy Business Association in a federal lawsuit seeking to protect nearly $289 million in congressionally approved funding for Community Development Financial Institutions (CDFIs) before that funding expires on September 30, 2026.
CDFIs are mission-driven lenders that provide capital and financial services to small businesses, entrepreneurs, affordable housing developments, health clinics, child-care centers, and communities that conventional financial institutions often do not adequately serve. As of September 2024, the CDFI Fund reported more than 1,400 certified CDFIs operating across the United States, the District of Columbia, and Puerto Rico.
Congress appropriated $324 million for the CDFI Fund for fiscal year 2025, including approximately $289 million for its award programs. CDFIs submitted applications for that funding in 2025. Yet, according to the complaint, the federal government delayed the funding process for more than seventeen months and, as of the filing of this lawsuit, had not completed the steps necessary to obligate the FY2025 program funds before they expire on September 30.
GBEF joined this case because access to capital is foundational to economic opportunity. When community lenders lose access to resources Congress has already approved, the consequences extend far beyond Washington. Small businesses wait for financing. Housing and community projects stall. CDFIs have less capital to deploy, and communities that already face limited access to affordable financing are forced to wait.
The lawsuit seeks to ensure that the executive branch carries out the funding decision Congress already made and does not effectively eliminate congressionally approved investment through delay.
CASE OVERVIEW
Jurisdiction: United States District Court for the District of Columbia
Case Style: Freedom Economy Business Association v. United States Department of the Treasury, et al.
Case Number: 1:26-cv-03288
Initial Filing Date: September 21, 2026
Presiding Judge: Hon. Carl J. Nichols
Type of Action: Administrative Procedure Act challenge; constitutional and appropriations claims
Current Filing: Complaint for Declaratory and Injunctive Relief; Motion for Temporary Restraining Order and Preliminary Injunction
Relief Sought by Freedom Economy: Declaratory and injunctive relief requiring the federal government to complete the FY2025 CDFI Program award process and obligate the appropriated funds before they expire on September 30, 2026.
PLAINTIFFS
Freedom Economy Business Association
Freedom Economy is a nationwide membership organization representing more than 20,000 members, including asset managers, investors, service providers, and Community Development Financial Institutions. The organization brought this lawsuit on behalf of members that applied for FY2025 CDFI Fund awards and were still awaiting final action when the case was filed.
DEFENDANTS
United States Department of the Treasury
Scott Bessent, in his official capacity as Secretary of the Treasury
Community Development Financial Institutions Fund
Chris Miller, in his official capacity as Director of the CDFI Fund
BACKGROUND
Congress created the CDFI Fund in 1994 to expand economic opportunity by supporting financial institutions that serve underserved communities. CDFIs include nonprofit loan funds, credit unions, community development banks, and venture capital funds. They finance small businesses, affordable housing, community facilities, and other investments while often providing technical assistance and financial counseling alongside capital.
Congress appropriated funding for the CDFI Fund for fiscal year 2025, including approximately $289 million for the Fund’s award programs. CDFIs submitted applications for the FY2025 funding round in 2025. According to the complaint, those applications remained unresolved far beyond the typical award timeline.
The complaint alleges that the Office of Management and Budget withheld apportionment of the FY2025 program funding for 359 days beyond the statutory deadline, releasing it only in April 2026 and subjecting Treasury to an additional requirement that OMB receive advance notice before award announcements or obligations.
Meanwhile, the administration proposed eliminating the CDFI Fund’s award programs. Congress rejected that proposal and again appropriated $324 million for the Fund for fiscal year 2026, including approximately $289 million for award programs. Congress also prohibited the use of appropriated funds to eliminate or reduce programs as proposed in the President’s budget unless Congress itself enacted the change.
On September 15, 2026, Treasury announced that FY2025 CDFI Program and Native American CDFI Assistance Program awards had been made. But as of Freedom Economy’s September 21 filing, Treasury had not publicly identified award recipients, disclosed award amounts, or indicated that Notices of Award or Assistance Agreements had been completed. The complaint alleges that any portion of the FY2025 appropriation not obligated by September 30, 2026 will expire.
Freedom Economy filed this lawsuit on September 21, 2026, seeking immediate judicial relief before the funding deadline. GBEF and Crowell & Moring LLP serve as counsel for the plaintiff.
LEGAL ARGUMENT
Freedom Economy advances several core arguments in support of relief, including:
1. Unlawfully Withheld or Unreasonably Delayed Agency Action.
Freedom Economy argues that Treasury has a mandatory duty to administer the CDFI Program, evaluate applications, make awards, and obligate congressionally appropriated funds before they expire. The complaint alleges that Treasury’s prolonged failure to complete those actions violates the Administrative Procedure Act.
2. Arbitrary, Capricious, and Contrary to Law.
Freedom Economy argues that the prolonged delay is arbitrary and unlawful because Congress repeatedly funded the CDFI Program even after the administration proposed eliminating it. The complaint alleges that continued inaction would effectively accomplish through delay what Congress rejected through legislation.
3. Appropriations Clause and Separation of Powers.
The lawsuit argues that Congress holds the constitutional power of the purse and that the executive branch cannot nullify or countermand Congress’s funding decisions by refusing to carry them out. Freedom Economy alleges that allowing the funds to expire would improperly substitute executive policy preferences for Congress’s appropriations decisions.
4. Impoundment of Congressionally Appropriated Funds.
Freedom Economy also asks the Court to declare that withholding the FY2025 CDFI program funds without following the procedures required by federal impoundment law is unlawful.
Freedom Economy has asked the Court to require defendants, before the September 30 deadline, to complete the pending FY2025 process, issue awards, obligate the funds consistent with federal law, and subsequently execute the required agreements and disburse the funds in the ordinary course.
ATTORNEYS
Counsel: Alphonso David, Global Black Economic Forum.
Counsel: Daniel W. Wolff, Derick D. Dailey, Sharmistha Das, Qorah Thorner, Henry Leung, and Cristina Diaz of Crowell & Moring LLP
BACKGROUND
The Texas Historically Underutilized Business (HUB) Program, codified under Tex. Gov’t Code Chapter 2161, was enacted in the 1990s to remedy documented discrimination in state contracting and expand access to economic opportunity.
The statute defines HUBs as small businesses majority-owned by economically disadvantaged individuals, including Black Americans, Hispanic Americans, women, Asian Pacific Americans, Native Americans, and disabled veterans.
On December 2, 2025, Acting Comptroller Hancock issued emergency regulations restructuring the program exclusively for service-disabled veteran-owned businesses and renaming it “VetHUB.”
On January 6, 2026, the Comptroller decertified thousands of minority- and women-owned businesses.
In March 2026, the Comptroller introduced proposed rules that mirror the emergency regulation—seeking to make these changes permanent despite ongoing litigation.
LEGAL ARGUMENT
The plaintiffs advance four core legal claims.
1. Ultra Vires Action (Exceeding Authority):
The Comptroller exceeded his statutory authority under Tex. Gov’t Code Chapter 2161 by attempting to rewrite and narrow the definition of HUB eligibility—power reserved to the Legislature.
2. Procedural Violations:
Both the emergency rule and proposed regulations fail to comply with the Texas Administrative Procedure Act, including requirements for notice, justification, and public participation.
3. Constitutional Violations (Due Process & Equal Protection):
The mass decertification of businesses without notice or opportunity to be heard deprived plaintiffs of a state-created property interest in violation of the Texas Constitution.
4. Separation of Powers:
The Comptroller’s actions usurp legislative authority and undermine the constitutional structure of Texas government.
The Legislature’s rejection of House Bill 167 in the 2025 session—legislation that would have implemented similar changes—further underscores that these actions bypass the lawful legislative process.
KEY FACTS & FIGURES
Approximately 16,000+ HUB-certified businesses existed prior to January 2026; fewer than 500 remain after decertification
Remaining certified businesses are almost exclusively service-disabled veteran-owned
In FY2024, HUB-certified businesses received approximately $4.1 billion in state contracts
In the first half of FY2025, TxDOT, HHSC, and TFC alone spent more than $1.6 billion on HUB-related contracts
State agencies have begun disregarding statutory HUB requirements, including assistance, subcontracting plans, and good-faith participation obligations
The challenged rules threaten millions in contracts, ongoing negotiations, and business viability across multiple industries
RELIEF SOUGHT
Declaration that the emergency and proposed regulations are null and void
Temporary and permanent injunction blocking enforcement of both rules
Reinstatement of plaintiffs’ HUB certifications
Order requiring state agencies to comply with statutory HUB obligations
Attorney’s fees and costs under Tex. Civ. Prac. & Rem. Code §§ 37.009, 106.002(b)
ATTORNEYS
Co-Lead Counsel: Alphonso David, Global Black Economic Forum.
Co-Lead Counsel: Adam Schuman, David Hoffman, Shanice Hinckson, Petrillo Klein + Boxer LLP.
Local Counsel: Chad W. Dunn, Brazil & Dunn LLP.
KEY FACTS & FIGURES
CBCF was established in 1976 and is marking 50 years of public policy, educational, and leadership development work.
The Spouses Education Scholarship was established in 1988.
Race is not an eligibility requirement for the 2026 scholarship cycle.
Applicants were not required to disclose their race or ethnicity.
The 2026 application opened on January 5, 2026, and closed on March 27, 2026.
CBCF removed outdated FAQ language on January 8, 2026.
The lawsuit was filed on April 2, 2026.
The amended complaint was filed on June 3, 2026.
CBCF filed its motion to dismiss on July 16, 2026.
Only one of the three anonymous students identified by plaintiffs submitted a 2026 application.
No 2026 scholarship recipients had been selected when the motion to dismiss was filed.
CBCF maintains that applicants of all races, ethnicities, and backgrounds are eligible and will not be evaluated on the basis of race.
RELIEF SOUGHT
Dismiss the amended complaint for lack of subject matter jurisdiction under Rule 12(b)(1).
Find that the plaintiffs lack standing.
Find that the plaintiffs' claims are not ripe.
Dismiss the claim concerning Congressional Black Caucus membership under the Speech or Debate Clause.
Dismiss the amended complaint with prejudice for failure to state a claim under Rule 12(b)(6).
Find that plaintiffs failed to plausibly allege intentional discrimination, but-for causation, or a contractual relationship under Section 1981.
Reject relief that would impermissibly burden CBCF's First Amendment rights.
BACKGROUND
The Texas Historically Underutilized Business (HUB) Program, codified under Tex. Gov’t Code Chapter 2161, was enacted in the 1990s to remedy documented discrimination in state contracting and expand access to economic opportunity.
The statute defines HUBs as small businesses majority-owned by economically disadvantaged individuals, including Black Americans, Hispanic Americans, women, Asian Pacific Americans, Native Americans, and disabled veterans.
On December 2, 2025, Acting Comptroller Hancock issued emergency regulations restructuring the program exclusively for service-disabled veteran-owned businesses and renaming it “VetHUB.”
On January 6, 2026, the Comptroller decertified thousands of minority- and women-owned businesses.
In March 2026, the Comptroller introduced proposed rules that mirror the emergency regulation—seeking to make these changes permanent despite ongoing litigation.
LEGAL ARGUMENT
The plaintiffs advance four core legal claims.
1. Ultra Vires Action (Exceeding Authority):
The Comptroller exceeded his statutory authority under Tex. Gov’t Code Chapter 2161 by attempting to rewrite and narrow the definition of HUB eligibility—power reserved to the Legislature.
2. Procedural Violations:
Both the emergency rule and proposed regulations fail to comply with the Texas Administrative Procedure Act, including requirements for notice, justification, and public participation.
3. Constitutional Violations (Due Process & Equal Protection):
The mass decertification of businesses without notice or opportunity to be heard deprived plaintiffs of a state-created property interest in violation of the Texas Constitution.
4. Separation of Powers:
The Comptroller’s actions usurp legislative authority and undermine the constitutional structure of Texas government.
The Legislature’s rejection of House Bill 167 in the 2025 session—legislation that would have implemented similar changes—further underscores that these actions bypass the lawful legislative process.
KEY FACTS & FIGURES
Approximately 16,000+ HUB-certified businesses existed prior to January 2026; fewer than 500 remain after decertification
Remaining certified businesses are almost exclusively service-disabled veteran-owned
In FY2024, HUB-certified businesses received approximately $4.1 billion in state contracts
In the first half of FY2025, TxDOT, HHSC, and TFC alone spent more than $1.6 billion on HUB-related contracts
State agencies have begun disregarding statutory HUB requirements, including assistance, subcontracting plans, and good-faith participation obligations
The challenged rules threaten millions in contracts, ongoing negotiations, and business viability across multiple industries
RELIEF SOUGHT
Declaration that the emergency and proposed regulations are null and void
Temporary and permanent injunction blocking enforcement of both rules
Reinstatement of plaintiffs’ HUB certifications
Order requiring state agencies to comply with statutory HUB obligations
Attorney’s fees and costs under Tex. Civ. Prac. & Rem. Code §§ 37.009, 106.002(b)
ATTORNEYS
Co-Lead Counsel: Alphonso David, Global Black Economic Forum.
Co-Lead Counsel: Adam Schuman, David Hoffman, Shanice Hinckson, Petrillo Klein + Boxer LLP.
Local Counsel: Chad W. Dunn, Brazil & Dunn LLP.
ABOUT THE CASE
The Global Black Economic Forum is proud to serve as counsel to the Freedom Economy Business Association in a federal lawsuit seeking to protect nearly $289 million in congressionally approved funding for Community Development Financial Institutions (CDFIs) before that funding expires on September 30, 2026.
CDFIs are mission-driven lenders that provide capital and financial services to small businesses, entrepreneurs, affordable housing developments, health clinics, child-care centers, and communities that conventional financial institutions often do not adequately serve. As of September 2024, the CDFI Fund reported more than 1,400 certified CDFIs operating across the United States, the District of Columbia, and Puerto Rico.
Congress appropriated $324 million for the CDFI Fund for fiscal year 2025, including approximately $289 million for its award programs. CDFIs submitted applications for that funding in 2025. Yet, according to the complaint, the federal government delayed the funding process for more than seventeen months and, as of the filing of this lawsuit, had not completed the steps necessary to obligate the FY2025 program funds before they expire on September 30.
GBEF joined this case because access to capital is foundational to economic opportunity. When community lenders lose access to resources Congress has already approved, the consequences extend far beyond Washington. Small businesses wait for financing. Housing and community projects stall. CDFIs have less capital to deploy, and communities that already face limited access to affordable financing are forced to wait.
The lawsuit seeks to ensure that the executive branch carries out the funding decision Congress already made and does not effectively eliminate congressionally approved investment through delay.
CASE OVERVIEW
Jurisdiction: United States District Court for the District of Columbia
Case Style: Freedom Economy Business Association v. United States Department of the Treasury, et al.
Case Number: 1:26-cv-03288
Initial Filing Date: September 21, 2026
Presiding Judge: Hon. Carl J. Nichols
Type of Action: Administrative Procedure Act challenge; constitutional and appropriations claims
Current Filing: Complaint for Declaratory and Injunctive Relief; Motion for Temporary Restraining Order and Preliminary Injunction
Relief Sought by Freedom Economy: Declaratory and injunctive relief requiring the federal government to complete the FY2025 CDFI Program award process and obligate the appropriated funds before they expire on September 30, 2026.
PLAINTIFFS
Freedom Economy Business Association
Freedom Economy is a nationwide membership organization representing more than 20,000 members, including asset managers, investors, service providers, and Community Development Financial Institutions. The organization brought this lawsuit on behalf of members that applied for FY2025 CDFI Fund awards and were still awaiting final action when the case was filed.
DEFENDANTS
United States Department of the Treasury
Scott Bessent, in his official capacity as Secretary of the Treasury
Community Development Financial Institutions Fund
Chris Miller, in his official capacity as Director of the CDFI Fund
BACKGROUND
Congress created the CDFI Fund in 1994 to expand economic opportunity by supporting financial institutions that serve underserved communities. CDFIs include nonprofit loan funds, credit unions, community development banks, and venture capital funds. They finance small businesses, affordable housing, community facilities, and other investments while often providing technical assistance and financial counseling alongside capital.
Congress appropriated funding for the CDFI Fund for fiscal year 2025, including approximately $289 million for the Fund’s award programs. CDFIs submitted applications for the FY2025 funding round in 2025. According to the complaint, those applications remained unresolved far beyond the typical award timeline.
The complaint alleges that the Office of Management and Budget withheld apportionment of the FY2025 program funding for 359 days beyond the statutory deadline, releasing it only in April 2026 and subjecting Treasury to an additional requirement that OMB receive advance notice before award announcements or obligations.
Meanwhile, the administration proposed eliminating the CDFI Fund’s award programs. Congress rejected that proposal and again appropriated $324 million for the Fund for fiscal year 2026, including approximately $289 million for award programs. Congress also prohibited the use of appropriated funds to eliminate or reduce programs as proposed in the President’s budget unless Congress itself enacted the change.
On September 15, 2026, Treasury announced that FY2025 CDFI Program and Native American CDFI Assistance Program awards had been made. But as of Freedom Economy’s September 21 filing, Treasury had not publicly identified award recipients, disclosed award amounts, or indicated that Notices of Award or Assistance Agreements had been completed. The complaint alleges that any portion of the FY2025 appropriation not obligated by September 30, 2026 will expire.
Freedom Economy filed this lawsuit on September 21, 2026, seeking immediate judicial relief before the funding deadline. GBEF and Crowell & Moring LLP serve as counsel for the plaintiff.
LEGAL ARGUMENT
Freedom Economy advances several core arguments in support of relief, including:
1. Unlawfully Withheld or Unreasonably Delayed Agency Action.
Freedom Economy argues that Treasury has a mandatory duty to administer the CDFI Program, evaluate applications, make awards, and obligate congressionally appropriated funds before they expire. The complaint alleges that Treasury’s prolonged failure to complete those actions violates the Administrative Procedure Act.
2. Arbitrary, Capricious, and Contrary to Law.
Freedom Economy argues that the prolonged delay is arbitrary and unlawful because Congress repeatedly funded the CDFI Program even after the administration proposed eliminating it. The complaint alleges that continued inaction would effectively accomplish through delay what Congress rejected through legislation.
3. Appropriations Clause and Separation of Powers.
The lawsuit argues that Congress holds the constitutional power of the purse and that the executive branch cannot nullify or countermand Congress’s funding decisions by refusing to carry them out. Freedom Economy alleges that allowing the funds to expire would improperly substitute executive policy preferences for Congress’s appropriations decisions.
4. Impoundment of Congressionally Appropriated Funds.
Freedom Economy also asks the Court to declare that withholding the FY2025 CDFI program funds without following the procedures required by federal impoundment law is unlawful.
Freedom Economy has asked the Court to require defendants, before the September 30 deadline, to complete the pending FY2025 process, issue awards, obligate the funds consistent with federal law, and subsequently execute the required agreements and disburse the funds in the ordinary course.
ATTORNEYS
Counsel: Alphonso David, Global Black Economic Forum.
Counsel: Daniel W. Wolff, Derick D. Dailey, Sharmistha Das, Qorah Thorner, Henry Leung, and Cristina Diaz of Crowell & Moring LLP
CBCF was established in 1976 and is marking 50 years of public policy, educational, and leadership development work.
The Spouses Education Scholarship was established in 1988.
Race is not an eligibility requirement for the 2026 scholarship cycle.
Applicants were not required to disclose their race or ethnicity.
The 2026 application opened on January 5, 2026, and closed on March 27, 2026.
CBCF removed outdated FAQ language on January 8, 2026.
The lawsuit was filed on April 2, 2026.
CBCF filed its motion to dismiss on July 16, 2026.
The amended complaint was filed on June 3, 2026.
Only one of the three anonymous students identified by plaintiffs submitted a 2026 application.
No 2026 scholarship recipients had been selected when the motion to dismiss was filed.
CBCF maintains that applicants of all races, ethnicities, and backgrounds are eligible and will not be evaluated on the basis of race.
RELIEF SOUGHT
Dismiss the amended complaint for lack of subject matter jurisdiction under Rule 12(b)(1).
Find that the plaintiffs lack standing.
Find that the plaintiffs' claims are not ripe.
Dismiss the claim concerning Congressional Black Caucus membership under the Speech or Debate Clause.
Dismiss the amended complaint with prejudice for failure to state a claim under Rule 12(b)(6).
Find that plaintiffs failed to plausibly allege intentional discrimination, but-for causation, or a contractual relationship under Section 1981.
Reject relief that would impermissibly burden CBCF's First Amendment rights.
IN THE NEWS
IN THE NEWS
CASE DOCUMENTS
Complaint for
Declaratory and
Injunctive Relief
Proposed
Order
Complaint for
Declaratory and
Injunctive Relief
Proposed
Order
The case was filed on September 21, and the court immediately ordered the parties to confer on an expedited briefing schedule for the emergency motion, underscoring the urgency created by the September 30 funding deadline.
Complaint for
Declaratory and
Injunctive Relief
Motion for Temporary Retraining Order and
Preliminary Injunction
Memorandum in Support of Motion for Temporary Restraining Order and Preliminary Injunction
Supporting
Declaration
Proposed
Order
Freedom Economy/
GBEF Press Release
September 21
Press Conference
CDFI Background Explainer
The case was filed on September 21, and the court immediately ordered the parties to confer on an expedited briefing schedule for the emergency motion, underscoring the urgency created by the September 30 funding deadline.
The HUB Case
GBEF wins temporary injunction in landmark litigation for business owners in Texas
CASE OVERVIEW
Jurisdiction: Travis County District Court, State of Texas
Case Style: Globe Express Trucking Inc., et al. v. Kelly Hancock, Acting Texas Comptroller of Public Accounts, et al.
Case Number: D-1-GN-26-001941
Initial Filing Date: March 2, 2026
Updated Filing Date: March 13, 2026
Type of Action: Verified Original Petition and Application for Declaratory and Injunctive Relief
Relief Sought: Temporary Injunction, Permanent Injunction, Declaratory Judgment
PLAINTIFFS
Globe Express Trucking Inc. – Dallas, TX (mail delivery; founded by Black American woman Marie-Pascale Ruberandinda)
Kirstins Care LLC – Dallas, TX (childcare services; founded by Black American woman Kirstin Green)
Ipsum General Contractors, LLC – Houston, TX (general contractor; founded by Hispanic American Ruben Mercado Jr.)
Mpulse Healthcare & Technology, LLC – Sugar Land, TX (medical technology distributor; owned by Black American Tyrone Dixon)
Williams Professional Water Restoration Service LLC – Burleson, TX (restoration services; owned by Black American woman Cortena Williams)
Houston WiFi, Ltd. Co. d/b/a Houston Construction Services – Houston, TX (general contractor; owned by Hispanic American Ray Gutierrez)
NAMC, Inc. – Greater Houston Chapter – Houston, TX (nonprofit trade association representing 150+ minority- and women-owned contractors)
DEFENDANTS
Kelly Hancock, Acting Texas Comptroller of Public Accounts (official capacity)
Adriana Cruz, Executive Director, Texas Economic Development & Tourism Office (official capacity)
Marc D. Williams, Executive Director, Texas Department of Transportation (official capacity)
Stephanie Muth, Executive Commissioner, Texas Health and Human Services Commission (official capacity)
Will Mckerall, Executive Director, Texas Facilities Commission (official capacity)
CASE OVERVIEW
Jurisdiction: Travis County District Court, State of Texas
Case Style: Globe Express Trucking Inc., et al. v. Kelly Hancock, Acting Texas Comptroller of Public Accounts, et al.
Case Number: D-1-GN-26-001941
Initial Filing Date: March 2, 2026
Updated Filing Date: March 13, 2026
Hearing Date: March 30, 2026, 9:00 AM CT
Type of Action: Verified Original Petition and Application for Declaratory and Injunctive Relief
Relief Sought: Temporary Injunction, Permanent Injunction, Declaratory Judgment
PLAINTIFFS
Globe Express Trucking Inc. – Dallas, TX (mail delivery; founded by Black American woman Marie-Pascale Ruberandinda)
Kirstins Care LLC – Dallas, TX (childcare services; founded by Black American woman Kirstin Green)
Ipsum General Contractors, LLC – Houston, TX (general contractor; founded by Hispanic American Ruben Mercado Jr.)
Mpulse Healthcare & Technology, LLC – Sugar Land, TX (medical technology distributor; owned by Black American Tyrone Dixon)
Williams Professional Water Restoration Service LLC – Burleson, TX (restoration services; owned by Black American woman Cortena Williams)
Houston WiFi, Ltd. Co. d/b/a Houston Construction Services – Houston, TX (general contractor; owned by Hispanic American Ray Gutierrez)
NAMC, Inc. – Greater Houston Chapter – Houston, TX (nonprofit trade association representing 150+ minority- and women-owned contractors)
DEFENDANTS
Kelly Hancock, Acting Texas Comptroller of Public Accounts (official capacity)
Adriana Cruz, Executive Director, Texas Economic Development & Tourism Office (official capacity)
Marc D. Williams, Executive Director, Texas Department of Transportation (official capacity)
Stephanie Muth, Executive Commissioner, Texas Health and Human Services Commission (official capacity)
Will Mckerall, Executive Director, Texas Facilities Commission (official capacity)
BACKGROUND
The Texas Historically Underutilized Business (HUB) Program, codified under Tex. Gov’t Code Chapter 2161, was enacted in the 1990s to remedy documented discrimination in state contracting and expand access to economic opportunity.
The statute defines HUBs as small businesses majority-owned by economically disadvantaged individuals, including Black Americans, Hispanic Americans, women, Asian Pacific Americans, Native Americans, and disabled veterans.
On December 2, 2025, Acting Comptroller Hancock issued emergency regulations restructuring the program exclusively for service-disabled veteran-owned businesses and renaming it “VetHUB.”
On January 6, 2026, the Comptroller decertified thousands of minority- and women-owned businesses.
In March 2026, the Comptroller introduced proposed rules that mirror the emergency regulation—seeking to make these changes permanent despite ongoing litigation.
LEGAL ARGUMENT
The plaintiffs advance four core legal claims.
1. Ultra Vires Action (Exceeding Authority):
The Comptroller exceeded his statutory authority under Tex. Gov’t Code Chapter 2161 by attempting to rewrite and narrow the definition of HUB eligibility—power reserved to the Legislature.
2. Procedural Violations:
Both the emergency rule and proposed regulations fail to comply with the Texas Administrative Procedure Act, including requirements for notice, justification, and public participation.
3. Constitutional Violations (Due Process & Equal Protection):
The mass decertification of businesses without notice or opportunity to be heard deprived plaintiffs of a state-created property interest in violation of the Texas Constitution.
4. Separation of Powers:
The Comptroller’s actions usurp legislative authority and undermine the constitutional structure of Texas government.
The Legislature’s rejection of House Bill 167 in the 2025 session—legislation that would have implemented similar changes—further underscores that these actions bypass the lawful legislative process.
KEY FACTS & FIGURES
Approximately 16,000+ HUB-certified businesses existed prior to January 2026; fewer than 500 remain after decertification
Remaining certified businesses are almost exclusively service-disabled veteran-owned
In FY2024, HUB-certified businesses received approximately $4.1 billion in state contracts
In the first half of FY2025, TxDOT, HHSC, and TFC alone spent more than $1.6 billion on HUB-related contracts
State agencies have begun disregarding statutory HUB requirements, including assistance, subcontracting plans, and good-faith participation obligations
The challenged rules threaten millions in contracts, ongoing negotiations, and business viability across multiple industries
RELIEF SOUGHT
Declaration that the emergency and proposed regulations are null and void
Temporary and permanent injunction blocking enforcement of both rules
Reinstatement of plaintiffs’ HUB certifications
Order requiring state agencies to comply with statutory HUB obligations
Attorney’s fees and costs under Tex. Civ. Prac. & Rem. Code §§ 37.009, 106.002(b)
ATTORNEYS
Co-Lead Counsel: Alphonso David, Global Black Economic Forum.
Co-Lead Counsel: Adam Schuman, David Hoffman, Shanice Hinckson, Petrillo Klein + Boxer LLP.
Local Counsel: Chad W. Dunn, Brazil & Dunn LLP.
BACKGROUND
The Texas Historically Underutilized Business (HUB) Program, codified under Tex. Gov’t Code Chapter 2161, was enacted in the 1990s to remedy documented discrimination in state contracting and expand access to economic opportunity.
The statute defines HUBs as small businesses majority-owned by economically disadvantaged individuals, including Black Americans, Hispanic Americans, women, Asian Pacific Americans, Native Americans, and disabled veterans.
On December 2, 2025, Acting Comptroller Hancock issued emergency regulations restructuring the program exclusively for service-disabled veteran-owned businesses and renaming it “VetHUB.”
On January 6, 2026, the Comptroller decertified thousands of minority- and women-owned businesses.
In March 2026, the Comptroller introduced proposed rules that mirror the emergency regulation—seeking to make these changes permanent despite ongoing litigation.
LEGAL ARGUMENT
The plaintiffs advance four core legal claims.
1. Ultra Vires Action (Exceeding Authority):
The Comptroller exceeded his statutory authority under Tex. Gov’t Code Chapter 2161 by attempting to rewrite and narrow the definition of HUB eligibility—power reserved to the Legislature.
2. Procedural Violations:
Both the emergency rule and proposed regulations fail to comply with the Texas Administrative Procedure Act, including requirements for notice, justification, and public participation.
3. Constitutional Violations (Due Process & Equal Protection):
The mass decertification of businesses without notice or opportunity to be heard deprived plaintiffs of a state-created property interest in violation of the Texas Constitution.
4. Separation of Powers:
The Comptroller’s actions usurp legislative authority and undermine the constitutional structure of Texas government.
The Legislature’s rejection of House Bill 167 in the 2025 session—legislation that would have implemented similar changes—further underscores that these actions bypass the lawful legislative process.
KEY FACTS & FIGURES
Approximately 16,000+ HUB-certified businesses existed prior to January 2026; fewer than 500 remain after decertification
Remaining certified businesses are almost exclusively service-disabled veteran-owned
In FY2024, HUB-certified businesses received approximately $4.1 billion in state contracts
In the first half of FY2025, TxDOT, HHSC, and TFC alone spent more than $1.6 billion on HUB-related contracts
State agencies have begun disregarding statutory HUB requirements, including assistance, subcontracting plans, and good-faith participation obligations
The challenged rules threaten millions in contracts, ongoing negotiations, and business viability across multiple industries
RELIEF SOUGHT
Declaration that the emergency and proposed regulations are null and void
Temporary and permanent injunction blocking enforcement of both rules
Reinstatement of plaintiffs’ HUB certifications
Order requiring state agencies to comply with statutory HUB obligations
Attorney’s fees and costs under Tex. Civ. Prac. & Rem. Code §§ 37.009, 106.002(b)
ATTORNEYS
Co-Lead Counsel: Alphonso David, Global Black Economic Forum.
Co-Lead Counsel: Adam Schuman, David Hoffman, Shanice Hinckson, Petrillo Klein + Boxer LLP.
Local Counsel: Chad W. Dunn, Brazil & Dunn LLP.
IN THE NEWS
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© 2025 Global Black Economic Forum. All Rights Reserved.
Join Us In Action
Become part of our global community working to make economic justice a reality for all.
© 2025 Global Black Economic Forum.
All Rights Reserved.