A COVID-19 relief fund was only for Black residents. Then came the lawsuits.

Black civic leaders in Oregon heard the alarm bells early in the pandemic.

Data and anecdotes around the country suggested that the coronavirus was disproportionately killing Black people. Locally, Black business owners had begun fretting about their livelihoods, as stay-at-home orders and various other measures were put into place. Many did not have valuable houses they could tap for capital, and requests for government assistance had gone nowhere.

After convening several virtual meetings, the civic leaders proposed a bold and novel solution that state lawmakers approved in July. The state would earmark $62 million of its $1.4 billion in federal COVID-19 relief money to provide grants to Black residents, business owners and community organizations enduring pandemic-related hardships.

“It was finally being honest: This is who needs this support right now,” said Lew Frederick, a state senator who is Black.

But now millions of dollars in grants are on hold after one Mexican American and two white business owners sued the state, arguing that the fund for Black residents discriminated against them.

The dispute in Oregon is the latest legal skirmish in the nation’s decadeslong battle over affirmative action, and comes in a year in which the pandemic has starkly exposed the socioeconomic and health disparities that African Americans face. It has unfolded, too, against the backdrop of the Black Lives Matter movement, with institutions across America — from corporations to city councils — acknowledging systemic racism, and activists demanding that meaningful steps be taken to undo racial inequities.

Politicians, social scientists and jurists have long clashed over how far the government and institutions should go to repair the harm caused by racial discrimination — and the extent to which past racism should influence today’s decisions. In creating the Oregon Cares Fund, lawmakers took the rare step of explicitly naming a single racial group as the beneficiary, arguing that Black residents have been subjected to unique discrimination that put them at a disadvantage during the pandemic.

Over the decades, various remedies to address discrimination have been met with legal challenges. Supreme Court rulings have established that race-based policies are constitutional only if they achieve a compelling governmental interest and are narrowly tailored to do so. The court has most notably allowed race to be used as a factor in college admissions to achieve student diversity. But the court in recent decades has also sided against one of the original rationales for affirmative action policies — to undo past discrimination and its lingering effect.

“You have to show that there’s this really close nexus between why you’re using race and the outcome you’re seeking,” said Melissa Murray, a professor of law at New York University. “And I think here it’s going to be a real question as to whether funding just Black businesses through this Cares fund is actually the only way that you could address the problems that Black Oregonians have experienced during this particular period.”

In Oregon, the stakes are dire. Nearly $50 million worth of grants have been awarded, but a court has frozen $8.8 million, the remaining amount minus administrative costs, until the litigation is resolved, a process that could take years.

With Congress having recently extended the deadline to the end of this year for states to spend their CARES Act funds or return what remains to the federal government, some worry that lengthy litigation could mean the money is lost for good.

Oregon’s long history of anti-Black racism has fueled much of the advocacy for the state’s fund. And while other racial groups have said they supported it, critics have argued that Black people are not the only ones who have faced discrimination in the state.

Some Black residents, who make up about 2% of the state’s population, said that argument was a distraction.

“As a state, as a country, it is unusual for us to provide adequate resources to Black people,” said Nkenge Harmon Johnson, president and chief executive of the Urban League of Portland. “For some folks, it’s shocking, it’s distasteful.”

But Edward Blum, a white conservative activist whose organization, Project on Fair Representation, is underwriting one of two lawsuits challenging the fund, said the opposition was about preventing racial exclusion.

“It is like, in the employment arena, going to apply for a job and seeing a sign on the employment office that reads, ‘No Asians need apply,’” said Blum, who has led efforts to challenge race-based admissions policies at universities, including a high-profile case against Harvard. “Your race and your ethnicity should not be used to help you or harm you in your life’s endeavors.”

Walter Leja, a plaintiff in one of the lawsuits, said he might be on the verge of laying off employees from Dynamic Service Fire and Security, the small electrical services company he started in Salem in 2007, if he did not receive relief money soon. An earlier loan of about $20,000 from the federal Paycheck Protection Program, he said, was just enough to cover payroll for about two months.

Leja, who is 64 and white, said he could not say whether historic discrimination put Black business owners at a disadvantage. But a particular fund, he said, was not warranted.

“It’s discriminatory,” he said. “It’s locking up a bunch of funds that can only be used by Black businesses when there’s a ton of other businesses out there that need access to those funds. It’s not a white or Black thing. It’s an everybody thing.”

That lawsuit — a class-action case led by Leja and the white owner of a logging company, Great Northern Resources, based in the city of John Day — is one of two that challenges the fund. The other, underwritten by the Center for Individual Rights, a nonprofit law firm advocating limited government, involves a Mexican American owner of the Revolucion Coffee House, in Portland, who has claimed discrimination.

Many of today’s economic and health disparities stem from past policies and practices that were explicitly racist, some social scientists say, arguing that measures aimed at particular races were necessary to undo the damage. But courts have set a high bar for allowing the clear use of race in legislation. To get around the legal hurdles, policymakers tend to rely on proxies for race — like ZIP codes and socioeconomic status — when designing measures they hope will benefit marginalized racial groups.

But Akasha Lawrence Spence, a state representative, said subtle measures were not enough for the current crisis. Specifically targeting Black Oregonians for relief was an important step in forcing people to grasp the effects of racism, she added.

“This fund says that we understand that for no other reason than the color of your skin, you have been restricted and prohibited from accessing the tools to economically mobilize,” she said. “For that reason, we’re not going to create any veiled language. We as the Black community are tired of that.”

Supporters of the fund argued that the $62 million accounted for about 4.5% of what the state received, leaving plenty for residents who are not Black. They also noted that other COVID-19-related funds were tailored in a way that allowed them to almost exclusively benefit particular racial or ethnic groups — a $10 million fund created by the state that largely benefits Latino immigrants in the country without permission and one created by Portland officials to aid a district of largely Asian-owned businesses.

Designing measures in that way to target Black residents would be difficult and fail to have a significant impact, they said.

Oregon’s history of racism predates its statehood. As a territory in 1844, it passed a law banning African Americans from settling there.

The state’s Black population ballooned in the 1940s as many Southerners migrated West for jobs in the wartime industries. Like in many other parts of the country, the new Black settlers in Oregon were restricted to certain areas. In 1990, 80% of the state’s Black population was confined to two ZIP codes in Northeast Portland, according to Stephen Green, a Portland native and former banker.

Banks and other investors largely avoided doing business in those communities. Residents were also displaced when parts of those neighborhoods were razed at different times to build a highway, a sports arena and a hospital.

That history robbed many African Americans of opportunities to build wealth, historians say, a legacy that continues. The racial wealth gap in Multnomah County, which includes Portland, is larger now than it was 40 years ago, with Black residents holding fewer assets than other racial groups.

In 2019, Black Oregonians received four of the 984 loans that the Small Business Administration issued statewide, according to The Portland Business Journal.

Without traditional banking relationships, Black business owners often have had to reach into their own pockets or seek other avenues to finance startup costs, civic leaders said. That left many unable to get pandemic relief loans offered by the federal government because the loans required going through lending institutions.

Early in the pandemic, various indicators appeared to show that Black businesses were suffering more severely than others. A Stanford University study found that the number of Black business owners nationwide dropped by 41% from February to April, compared with a 32% decrease for Latinos, 26% for Asians and 17% for white owners.

Lawyers defending the Oregon Cares Fund have argued that the state has a duty to ensure that the distribution of COVID-19 relief funds does not perpetuate the disparities Black residents face. That means targeting Black residents for relief because other efforts to address inequality have failed, said Janelle Bynum, a state representative who is Black.

“Without that intentionality, without them actually caring that the money flows through our communities, they’ll never have to do anything to change the status quo,” she said. “I’m not OK with that.”

But some legal scholars and a lawyer for the state Legislature said the fund could violate the 14th Amendment’s equal protection guarantees.

Clark D. Cunningham, a law professor at Georgia State University, was dubious of the 14th Amendment claims. About a month after the amendment passed Congress in 1866, those same politicians reauthorized the Freedmen’s Bureau, an agency meant to primarily help formerly enslaved African Americans, he said.

“The idea that, in this case, a lumber company could use the 14th Amendment as a weapon to prevent the descendants of slaves from receiving an economic benefit in a time of disaster is utterly inconsistent with the historical context,” Cunningham said.

In Portland, Joy Mack said the pandemic rekindled the stress she felt when she opened the Jayah Rose Salon in 2008. She and her husband, an engineer, are both Black and solidly middle class. But after visiting more than 10 lending institutions to try to get startup funding, she received only two loans, she said. One of the lenders kept asking for more financial information, so they eventually walked away from the relationship.

In trying to keep her hair salon afloat amid the pandemic, Mack, 45, said she applied for a forgivable federal government loan but was turned down because she had about $5,000 in tax debt. She got a $5,000 grant from the city and a $10,000 disaster loan from the federal government. She also has had to take out lines of credit.

Mack eventually received a grant from the Oregon Cares Fund. Although she would not say how much she received, she said it saved her from having to close down under the weight of tens of thousands of dollars of debt.

“Honestly,” she said, “that is what just helped us get over that COVID hump.”

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