Appeals judges halt Atlanta DEI grant fund for Black female-led businesses

Panel decision comes amid legal efforts to challenge diversity, equity and inclusion efforts in the private sector
Fearless Fund co-founders and CEO Ayana Parsons, left, and Arian Simone, center, Ben Crump, attorney, right, and supporters hold a  press conference after appearing in federal court at the James Lawrence King Federal Justice Building in Miami, Florida, on Wednesday, January 31, 2024. Carl Juste For the AJC

Credit: Courtesy photo/Carl Juste

Credit: Courtesy photo/Carl Juste

Fearless Fund co-founders and CEO Ayana Parsons, left, and Arian Simone, center, Ben Crump, attorney, right, and supporters hold a press conference after appearing in federal court at the James Lawrence King Federal Justice Building in Miami, Florida, on Wednesday, January 31, 2024. Carl Juste For the AJC

An Eleventh Circuit Court of Appeals panel halted an Atlanta venture capital fund’s small business grant program for Black women Monday, a major victory for conservative efforts to dismantle diversity, equity and inclusion programs in corporate America.

In a 2-1 ruling, the judges said the Fearless Fund’s contest likely violates the federal Civil Rights Act of 1866 that prohibits the use of race in making contracts. The three-judge panel, consisting of two judges appointed by former President Donald Trump and another appointed by former President Barack Obama, also found Fearless Fund is unlikely to enjoy First Amendment protection and its program inflicts irreparable harm.

Therefore, the appeals court panel reversed a September decision by a lower court judge and put a preliminary injunction into place.

The case is one of the more prominent legal challenges on DEI programs in corporate America and today’s ruling is a setback for supporters of those initiatives.

In August 2023, the American Alliance for Equal Rights, a conservative nonprofit, sued Fearless and its foundation over its Fearless Strivers grant contest, which awarded $20,000 small business grants to Black women. The Alliance was founded by Edward Blum, the activist behind the group that successfully challenged affirmative action in colleges and universities.

Blum’s organization alleged the grant program violates Section 1981 of the Reconstruction-era Civil Rights Act of 1866, which prohibits discrimination based on race when making and enforcing contracts. The Alliance argued Fearless is entering into a contract with the applicant, and because the grants are only for Black women, it’s racially discriminatory.

“Our nation’s civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented,” Blum said in a statement. “Programs that exclude certain individuals because of their race such as the ones the Fearless Fund has designed and implemented are unjust and polarizing. Significant majorities of all Americans believe that an individual’s race should not be a factor in our nation’s public policies.”

But Fearless argued it’s not actually a contract, it’s a charitable donation, and that type of giving is protected under the First Amendment.

Historically, Black women entrepreneurs receive a fraction of what other founders get. Between 2009 and 2017, only 0.0006% of VC funding went to businesses started by Black women, according to nonprofit advocacy group Digitalundivided. Black founders — men and women — receive only about 1% of U.S. venture capital funding, according to Crunchbase.

“This is devastating for the Fearless Fund and Foundation, and for the women in which we have invested in,” Arian Simone, CEO of the Fearless Fund, said in a statement. “The message these judges sent today is that diversity in Corporate America, education, or anywhere else should not exist. If this was truly about exercising free speech with your dollars — an American tradition as old as this nation itself — the results would have been different. Instead, these judges bought what a small group of white men were selling.”

But Simone added she would continue fighting.

“We are still open for business,” she said. “The Fearless Fund has worked tirelessly with what resources we have to support underrepresented communities. Our grants are essential for some companies. Women of color continue to lead the entrepreneurial pack and need support. I will not give up on this fight.”

Alphonso David, an attorney for Fearless Fund, said the group is evaluating next legal steps.

“The majority ruled that an 1866 law designed to provide economic freedom to newly-freed slaves actually prohibits the Fearless Foundation from providing grants to Black women. We disagree,” David said in a statement. “As the dissenting judge pointed out, the discrimination in access to funding that Fearless Foundation seeks to address is long-standing and irrefutable. This is the first court decision in the 150+ year history of the post-Civil War civil rights law that has halted private charitable support for any racial or ethnic group.”

In September 2023, a district court judge in Georgia ruled against the Alliance and allowed the grant program to continue. The group immediately appealed and the Eleventh Circuit paused the program while the case wound its way through the court.

In January this year, the Fearless Fund and the Alliance made their case to the appeals panel.

“The fact remains, though, that Fearless simply—and flatly— refuses to entertain applications from business owners who aren’t ‘black females.’ If that refusal were deemed sufficiently ‘expressive’ to warrant protection under the Free Speech Clause, then so would be every act of race discrimination, no matter at whom it was directed,” Judge Kevin Newsom, a Trump appointee, wrote in Monday’s decision.

But Judge Robin Rosenbaum, an Obama appointee, in her dissent compared the Alliance to athletes faking injuries to sway referees.

“But as American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field,” she wrote.

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