UPDATE: On July 6, 2021, the plaintiffs’ temporary restraining order previously issued by the court was dissolved and their motion for a preliminary injunction was stayed because a similar preliminary injunction was granted by different jurisdiction in the case Wynn v. Vilsack (No. 3:21-CV-514 (M.D. Fl. 2021)). The preliminary injunction issued in Wynn prevents the USDA from distributing debt relief payments under §1005 of the ARPA. Although the stay currently suspends the plaintiffs’ motion for a preliminary injunction, the judge determined the stay can be lifted and the plaintiffs’ motion can be given consideration by the court if the injunction issued in Wynn is vacated or materially altered.

UPDATE (7/29/21): A group of five Texas farmers have filed a class action lawsuit against the USDA (Miller, et al. v. Vilsack, No. 4:21-cv-00595 (N.D. Tex., 2021)) to challenge the debt relief program created under §1005 of the ARPA. In this lawsuit, the five named plaintiffs seek to represent two classes of all U.S. farmers and ranchers who: (1) are experiencing, or who will experience, racial discrimination from USDA’s implementation of the debt relief program, and (2) are ineligible for loan forgiveness because they do not qualify as a SDFR under the definition. On July 1, 2021, Judge Reed O’Connor, a federal judge serving the United States District Court for the Northern District of Texas, certified both classes of farmers and ranchers, which means this lawsuit will proceed as a class action.

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A group of farmers from nine different states have filed a lawsuit against the U.S. Department of Agriculture (“USDA”) alleging that its loan forgiveness payments violate the United States Constitution. This case is in addition to several other ongoing lawsuits brought in other jurisdictions. The farmers filed their lawsuit after the USDA was directed by Congress to forgive certain USDA loans held by socially disadvantaged farmers and ranchers. According to the plaintiffs, forgiving loans based on racial classifications is unconstitutional because it prohibits the certain borrowers from participating in the loan forgiveness program. The plaintiffs filed a motion for a temporary restraining order (“TRO”) seeking to prevent the USDA from moving forward with the loan forgiveness payments. On June 10, 2021, a federal judge granted the TRO which stops the USDA from issuing debt payoffs for a fourteen-day period.

Background

In response to the economic crisis caused by the COVID-19 pandemic, Congress passed a stimulus relief bill known as the American Rescue Plan Act of 2021 (“ARPA”). The ARPA is a $1.9 trillion coronavirus stimulus relief bill, $10.4 billion of which is allocated to the USDA. The agricultural provisions of the stimulus package contain specific instructions on how the USDA is to spend the relief funds. Accordingly, under those provisions, $4 billion given to the USDA will be used to provide debt relief for minority or socially disadvantaged farmers and ranchers.

According to the USDA, the $4 billion ARPA funding allows the agency to “increase opportunity, advance equity and address systemic discrimination in USDA programs.” Under Section 1005 of the ARPA, Congress instructs the USDA to provide direct payments in an amount up to 120% of a socially disadvantaged farmer’s or rancher’s outstanding debt as of January 1, 2021. Of the 120% direct payment, 100% pays off a minority producer’s loan balances. The additional 20% is offered to pay the taxes and fees associated with receiving the direct loan forgiveness payment.

The ARPA specifies that the $4 billion allocation is to forgive minority or socially disadvantaged producers’ loans. The ARPA uses Section 2501(a) of the Food, Agriculture, Conservation, and Trade Act of 1990 to define “socially disadvantaged” farmers and ranchers, which is someone “who is a member of a socially disadvantaged group,” which is further defined as “a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.” Thus, according to the USDA, farmers and ranchers eligible to receive loan forgiveness include, but are not limited to: Black/African-American, Hispanic/Latino, American Indian, Alaskan Native, Asian-American, and Pacific Islander. Under the current regulations, women are not included in this definition unless they are a member of one of the eligible groups.

In general, §1005 of the ARPA provides loan forgiveness for certain direct and guaranteed USDA loans. Direct loans are loans made directly from the USDA’s Farm Service Agency (“FSA”) to a farmer or rancher. The direct loans eligible for loan forgiveness include Conservation, Emergency, Farm Ownership, Grazing, Irrigation and Drainage, Operating, and Soil and Water, and Farm Storage Facility Loans. Guaranteed loans, on the other hand, are made by a private USDA-approved lender with the backing of the FSA. The guaranteed loans eligible under ARPA include Farm Ownership, Farm Operating, and Conservation loans. Importantly, both delinquent and current loans are eligible for debt relief under the ARPA.

While the USDA anticipates to forgive direct and guaranteed loans, the agency has decided to forgive direct loans first. On May 21, 2021, the FSA issued a notice of funding availability (“NOFA”) which contains guidance on eligibility requirements and procedures the agency will use to distribute loan forgiveness payments. The NOFA announced that the FSA will begin sending payment offer letters to socially disadvantaged producers with eligible direct loans. Additionally, the NOFA explains that the FSA will publish a separate NOFA in 120 days that addresses debt relief for guaranteed loans.

To participate in this debt relief program, eligible direct loan borrowers must return the payment offer letter they receive from the FSA. Currently, the FSA is sending letters to socially disadvantaged producers which offers a debt payoff for their direct loans. If a producer would like to participate in the debt relief program—after reviewing the letter—they must sign and return the letter to FSA. The FSA estimates it will take three weeks to process debt relief payments once the agency receives a producer’s signed letter.

While the USDA expected to start issuing debt relief payments for direct loans in early July, a group of farmers filed a lawsuit to prevent the USDA from distributing these payments.

Challenging Debt Relief Provisions

Recently, twelve farmers from nine states have come together to bring a lawsuit (Faust v. Vilsack, No. 21-C-548 (E.D. Wis. 2021)) against the USDA to challenge the debt relief program created under the ARPA; however, this is just one lawsuit of several that have been filed to challenge the ARPA’s loan forgiveness provisions. Specifically, the twelve plaintiffs claim the loan forgiveness provisions of the ARPA are unconstitutional because it violates their equal protection rights under the U.S. Constitution. Accordingly, the plaintiffs asked the court to issue a temporary restraining order (“TRO”) and a preliminary injunction to prevent the USDA from providing debt relief under §1005 of the ARPA.

Before a case goes to trial, some litigants file a single motion to a court asking the judge for a TRO and preliminary injunction. Essentially, both a TRO and preliminary injunction, if granted by the judge, restrains a party from beginning or continuing an action. Typically, TROs are short-term pre-trial injunctions that only last until the judge rules on whether or not to grant a preliminary injunction (usually 14 days). Preliminary injunctions may be issued by a judge before or during trial, and these injunctions typically remain in effect until the case is fully resolved. Generally, a judge can deny a party’s request for a TRO and subsequently grant the party’s motion for preliminary injunction, and vice versa.

Because TROs and preliminary injunctions serve the same function, a party asking for either of these injunctions satisfy four factors. To obtain a TRO or preliminary injunction, a party must show:

1. A likelihood they can win the lawsuit based on the facts and evidence of the case;
2. They will suffer irreparable injury if the TRO/preliminary injunction is denied;
3. The threat of their injury outweighs any damage to the opposing party; and
4. Granting the TRO/preliminary injunction will not harm the public interest.

When a litigant is asking for an injunction under this four-part test, the judge balances factors (1) and (2) against (3) and (4). If the first two outweigh the last two factors, a judge will most likely grant the party’s motion for an injunction. However, unlike preliminary injunctions, judges only grant a TRO to prevent immediate and permanent injury, loss, or damage to the party who filed the motion. In other words, a party asking for a TRO must meet a very high standard.

In the farmer-plaintiffs’ motion for a TRO and preliminary injunction, they claim the judge must grant their TRO and preliminary injunction because factors (1) and (2) significantly outweigh factors (3) and (4). Under the first factor, the plaintiffs argue they are likely to succeed in their lawsuit against USDA at trial because §1005 of the ARPA violates their equal protection guarantee under the U.S. Constitution. The Fifth Amendment of the U.S. Constitution provides individuals the right to be treated equally under the law. Accordingly, the plaintiffs claim the ARPA is unconstitutional because the law discriminates against the plaintiffs on the basis of race and excludes them from participating in debt relief due to their race.

When a plaintiff makes an equal protection claim, the court must determine whether the law passed by Congress is constitutional, which is a process known as judicial review. There are various forms of judicial review, but when a plaintiff sues the government for enacting a law that discriminates on the basis of race, the legislation is reviewed under strict scrutiny. Under strict scrutiny—the highest standard of review used evaluate the constitutionality of a law—the government must prove its race-based classification is necessary to achieve a compelling governmental interest, and the legislation is narrowly tailored to achieve that interest. Plaintiffs that successfully convince a court that an issue should be reviewed under strict scrutiny have a much higher likelihood of success due to the high burden put on the government.

The plaintiffs argue that USDA lacks a compelling interest for the racial classifications. In general, USDA claims the debt relief provisions under §1005 are necessary to remedy past discrimination. However, the plaintiffs say this is not a compelling governmental interest because the U.S. Supreme Court previously determined that legislation enacted to remedy past societal discrimination does not justify a race-based classification. Additionally, the plaintiffs state that §1005 is not narrowly tailored to achieve the government’s interest because Congress did not consider any alternative race-neutral measures. A race-neutral alternative that could be implemented, according to the plaintiffs, is providing debt relief to producers based on their financial needs rather than racial classification.

The plaintiffs also claim they meet the second factor of the balancing test because they will suffer irreparable harm if a TRO or preliminary injunction is denied by the judge. Currently, the USDA is sending offer letters to eligible producers and anticipates to begin issuing payment in July 2021. According to the plaintiffs, the USDA will spend the $4 billion allocated for debt relief before this case is litigated, and once the funds are depleted, the plaintiffs will have no ability to receive debt relief under §1005. As a result, the plaintiffs insist they will suffer irreparable injury unless their injunction is granted by the court.

Next, the plaintiffs allege that factors (3) and (4) of the balancing test weigh in their favor because granting a TRO and preliminary injunction to halt the distribution of debt relief payments does not injure the USDA or harm the public interest. Under the third factor, the USDA will not suffer an injury because the injunction does not prevent the agency from sending offer letters, processing the accepted offers, or offering assistance to producers. The fourth factor, according to the plaintiffs, favors their position because it is in the public’s interest to prevent an individual’s constitutional rights from being violated. In their conclusion, the plaintiffs claim the court must issue a TRO and a subsequent preliminary injunction because all four factors of the balancing test weights in their favor.

Ultimately, the court agreed with the plaintiffs that they will suffer immediate and irreparable harm if an injunction is not issued. On June 10, 2021, the federal court issued a TRO which halted the USDA from distributing debt relief payments under the ARPA. Consequently, until the court makes a determination on the plaintiff’s motion for preliminary injunction, the USDA is prohibited from providing loan forgiveness to socially disadvantaged farmers.

Conclusion

USDA filed a response opposing the plaintiffs’ motion for preliminary injunction on June 18, 2021, and the parties expect the Wisconsin federal court will soon make a ruling on whether or not to issue a preliminary injunction. If the judge issues a preliminary injunction, it will be unlikely that the USDA will be able to provide debt relief payments until after the case is fully resolved. If a preliminary injunction is not issued, USDA may begin distributing debt relief payments to socially disadvantaged producers. However, a few farmers in Montana, Texas, and Tennessee have filed their own lawsuits challenging the constitutionality of §1005 of the ARPA. If any of these courts issue a preliminary injunction against the USDA, it is unlikely that debt relief payments will be issued in the coming months.

An update to this article will be published as this lawsuit moves forward.

To read the complaint, click here.

To read the court’s decision granting the TRO, click here.

To read the complaint from (Holman v. Vilsack) (Tennessee case), click here.

To read the complaint from Carpenter v. Vilsack (Montana case), click here.

To read the complaint from Mill v. Vilsack (Texas case), click here.

For more information on Section 1005 of the ARPA, click here.