The Cost of Defending the Indefensible: How Government Stubbornness Wastes Taxpayer Dollars

In the recent decision on the case of Nuziard v. Minority Business Development Agency, 2024 U.S. Dist. LEXIS 183213 (N.D. Tex. April 26, 2024), a federal court awarded the plaintiffs over $357,000 in attorney’s fees—money that could have been saved had the government reconsidered its stance earlier in the litigation.

While this decision marks a win for constitutional protections, it also highlights a recurring problem: the significant financial toll placed on taxpayers when the government insists on defending legally indefensible positions.

Background: The Nuziard Case

The Minority Business Development Agency (MBDA), as part of its mission to support disadvantaged businesses, implemented policies that granted a presumption of disadvantage to certain racial and ethnic groups. Persons outside of those categories had an additional burden of proof in order to show their entitlement to the benefit. The plaintiffs challenged these policies, arguing that they violated the Constitution by relying on race-based classifications that did not meet the rigorous strict scrutiny standard.

Under U.S. law, any race-based government action must serve a compelling interest and be narrowly tailored to achieve that interest. However, the government’s defense of the MBDA policies was weak from the start. The agency failed to justify its use of race and ethnicity in a manner that could withstand constitutional scrutiny.

The Government's Defense: A Costly Misstep

In the wake of Students for Fair Admissions decision, many cases were brought challenging government policies that discriminated through favoritism such as in Nuziard. Many defendants thoughtfully revised their policies in light of the Supreme Court’s guidance. Even if the plaintiffs refused to end those cases, these early steps often cabined and limited the costs of these cases.

However, the government does not face the same constraints as a university or business. The attorneys for the government do not have to explain why their actions created a six-figure liability.

The government had to show that their defense was ‘substantially justified’ in order to avoid having to pay for the attorney’s fees of the plaintiff. This ““does not mean ‘justified to a high degree,’ but rather ‘justified in substane or in main’ — that is, justified to a degree that could satisfy a reasonable person.”” Nuziard, at *6-7 (quotations in original).

The government argued that the newly enacted Minority Business Development Act justified its actions. However, as the court pointed out, the agency’s justifications were flimsy at best. For example, only 0.06% of the relevant evidence provided by the government could be tied to the racial disparities the agency was tasked with addressing. Nuziard, at *8. The court made it clear that this minimal justification could not support the weight of a race-based classification system.

“The Government zealously argued in favor of a ramshackle presumption created piecemeal by grouping various races/ethnicities together with little though behind their inclusion and almost no considerations beyond the color of their skin.” Nuziard, at *10. The court went so far as to note that under the MBDA’s criteria, even an extremely wealthy individual like Oprah Winfrey would be considered presumptively disadvantaged based solely on her race. Nuziard, at *10.

The Financial Toll on Taxpayers

One of the most striking outcomes of the Nuziard case is the financial burden placed on taxpayers due to the government’s unwillingness to abandon a legally indefensible position. The court awarded $357,542.98 in attorney’s fees to the plaintiffs. This award represents the costs of the government’s insistence on defending policies that were clearly unconstitutional.

These funds—drawn from taxpayer dollars—could have been avoided altogether if the government had taken a more pragmatic approach. Instead of recognizing the legal vulnerability of its position and seeking a resolution, the government’s stubbornness prolonged the case, driving up legal fees and wasting public resources.

In addition to the direct financial costs of the attorney’s fees, there are the less visible costs associated with government legal defenses, including the time and resources spent by government attorneys and the judiciary on a case that was doomed from the start.

Why Does This Keep Happening?

Unfortunately, the Nuziard case is not unique. Government agencies often defend policies that are legally weak or even unconstitutional, resulting in costly litigation that taxpayers must foot the bill for. In many cases, there seems to be a reluctance within agencies to admit when their policies are on shaky legal ground. Rather than recalibrating in light of evolving legal standards, government entities frequently double down, leading to protracted legal battles that serve no one’s interest—least of all the public.

There may be several reasons for this stubbornness. Agencies might feel institutional pressure to defend newly enacted laws, or they may be driven by a belief that they can somehow win despite the overwhelming legal precedent against them. Whatever the reasons, the result is the same: taxpayers are left paying the price.

The Broader Implications

The Nuziard case highlights the urgent need for greater accountability in government decision-making, particularly when it comes to defending policies in court. When the government insists on defending indefensible positions, it not only wastes public money but also erodes public trust in its ability to manage resources wisely.

Moving forward, agencies should be more cautious in defending policies or cases that are likely to fail under constitutional scrutiny. By acknowledging legal vulnerabilities early and seeking alternative solutions, the government could save money in litigation costs and spare taxpayers the financial burden of unnecessary legal battles.

Conclusion: There is Not Much Hope for Reform

To prevent future cases of government waste, there needs to be a stronger commitment to legal accountability. I do not foresee that happening.

The City of New York paid $1.45 billion in settlements from July 1, 2022 to June 30, 2023. Many of these cost drivers involve mistakes from decades past. $218.8 million of those dollars were paid out on a case that began in 1996.

The Supreme Court of the United States has adopted what is sometimes referred to as the color-blind interpretation of the Fourteenth Amendment to the Constitution. This requires policies intended to assist a person based on their race to satisfy the same strict scrutiny as a policy intended to harm a person base on their race.

A politician’s disagreement with a Supreme Court, or other court decision, often finds its way into legislative language. The politician gets to see immediate benefits in the polls. The lawsuits challenging the actions often takes years, or even decades, to come to a resolution. The costs get spread amongst all taxpayers.

It fits the classic rent-seeking pattern of concentrated benefits and diffuse costs.