A U.S. federal court of appeals panel suspended a venture capital firm’s grant program for Black women business owners on Monday, ruling that a conservative group is likely to prevail in its lawsuit claiming that the program is discriminatory.|
ALEXANDRA OLSON
ASSOCIATED PRESS
NEW YORK — A U.S. federal court of appeals panel suspended a venture capital firm’s grant program for Black women business owners, ruling that a conservative group is likely to prevail in its lawsuit claiming that the program is discriminatory.
The ruling against the Atlanta-based Fearless Fund is another victory for conservative groups waging a sprawling legal battle against corporate diversity programs that have targeted dozens of companies and government institutions.
The case against the Fearless Fund was brought last year by the American American Alliance for Equal Rights, a group led by Edward Blum, the conservative activist behind the Supreme Court case that ended affirmative action in college admissions.
Blum applauded the ruling, saying “programs that exclude certain individuals because of their race such as the ones the Fearless Fund has designed and implemented are unjust and polarizing.”
Fearless Fund CEO and Founder Arian Simone said the ruling was “devastating" for the organizations and the women it has invested in.
“The message these judges sent today is that diversity in Corporate America, education, or anywhere else should not exist,” she said in statement. “These judges bought what a small group of white men were selling.”
Alphonso David, Fearless Fund’s legal counsel who serves as president and CEO of The Global Black Economic Forum, said all options were being evaluated to continue fighting the lawsuit.
The legal effort to dismantle workplace diversity programs has suffered its share of setbacks as well, reflecting polarized opinions among liberal and conservative judges on the issue. Last week, for example, a federal district judge in Ohio dismissed a lawsuit against the insurance company Progressive and fintech platform Hello Alice challenging a program that offers grants to help Black-owned small businesses purchase commercial vehicles. Similar lawsuits have been dismissed against Amazon, Pfizer and Starbucks.
The case against the Fearless Fund has been closely watched by civil rights groups, philanthropic organizations, employment lawyers and the venture capital industry as a bellwether for how the courts are viewing programs intended to level the playing field for racial minorities and other groups that have historically faced discrimination in businesses and workplaces.
In a 2-1 ruling, the panel of the U.S. Court of Appeals for the 11th Circuit in Miami found that Blum was likely to prevail in his lawsuit claiming the grant program violates section 1981 of the 1866 Civil Rights Act, which prohibits discrimination on the basis of race when enforcing contracts. The Reconstruction-era law was originally intended to protect formally enslaved people from economic exclusion, but anti-affirmative action activists have been leveraging it to challenge programs intended to benefit minority-owned businesses.
The court ordered the Fearless Fund to suspend its Strivers Grant Contest, which provides $20,000 to businesses that are majority owned by Black women, for the remainder of the lawsuit that is being litigated in a federal court in Atlanta. The ruling reversed a federal judge's ruling last year that the contest should be allowed to continue because Blum's lawsuit was likely to fail. However, the grant contest has been suspended since October after a separate panel of the federal appeals court swiftly granted Blum's request for an emergency injunction while he challenged the federal judge's original order.
The appeals court panel, consisting of two judges appointed by former President Donald Trump and one appointed by former President Barack Obama, rejected the Fearless Fund's arguments that the grants are not contracts but charitable donations protected by the First Amendment right to free speech.
“The fact remains, though, that Fearless simply —and flatly — refuses to entertain applications from business owners who aren’t 'black females,'" the court's majority opinion said, adding “every act of race discrimination” would be deemed expressive conduct under the Fearless Fund's argument.
The appeals panel also rejected the Fearless Fund's contention that Blum had no standing because the lawsuit was filed on behalf of three anonymous women who failed to demonstrate that they were “ready and able” to apply for the grant or that they had been injured by not being to do so.
Judge Robin Rosenbaum, an Obama appointee, disagreed in a blistering dissent, likening the plaintiffs' claims of harm to soccer players trying to win by “flopping on the field, faking an injury.” Rosenbaum said none of the plaintiffs demonstrated that they had any real intention to apply for the grants in what she called “cookie-cutter declarations” that were ”threadbare and devoid of substance."
