Fearless Fund grant program is discriminatory, appeals court rules: NPR

NEW YORK — A U.S. federal appeals court has suspended a venture capital firm’s grant program for black women business owners, ruling that a conservative group would likely prevail in its lawsuit, saying the program was discriminatory.

The ruling against the Atlanta-based Fearless Fund is news for conservative groups waging a sprawling legal battle against corporate diversity programs that seek victory for dozens of companies and government institutions.

The case against the Fearless Fund was brought last year by the American Alliance for Equal Rights, a group led by Edward Blum, the conservative activist behind the Supreme Court lawsuit that ended discrimination positive when it comes to university admissions.

Blum applauded the decision, saying “programs that exclude some people based on race, like those the Fearless Fund designed and implemented, are unfair and polarizing.”

Arian Simone, CEO and founder of the Fearless Fund, said the decision was “devastating” for the organizations and women they invested in.

“The message these justices sent today is that diversity in corporate America, in education or anywhere else should not exist,” she said in a statement. “These judges bought what a small group of white men were selling. »

Alphonso David, legal counsel for Fearless Fund and president and CEO of the Global Black Economic Forum, said all options are being evaluated to continue fighting the lawsuit.

The legal effort to dismantle workplace diversity programs has also suffered its share of setbacks, reflecting the polarized views among liberal and conservative justices on the issue. Last week, for example, a federal district judge in Ohio dismissed a lawsuit against insurance company Progressive and financial technology platform Hello Alice, challenging a program offering grants to help small, publicly-owned businesses. Blacks to 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, philanthropies, employment lawyers and the venture capital industry as an indicator of how courts view programs intended to level the playing field for racial minorities and other groups who have historically faced discrimination in businesses and workplaces.

In a 2-1 ruling, the 11th Circuit U.S. Court of Appeals in Miami ruled that Blum had a strong chance of prevailing in his lawsuit, saying the subsidy program violated Civil Section 1981. Rights Act of 1866, which prohibits discrimination in civil rights. basis of race when executing contracts. The Reconstruction-era law was originally intended to protect formally enslaved people from economic exclusion, but anti-affirmative action activists exploited it to challenge programs for minority-owned businesses.

The court ordered the Fearless-Owned Fund to suspend its Strivers Grant competition, which provides $20,000 to predominantly Black women-owned businesses, for the remainder of the ongoing trial in federal court in Atlanta. The ruling overturned 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 competition has been on hold since October after a separate panel of the federal appeals court quickly granted Blum’s request for an emergency injunction as he challenged the judge’s initial order federal.

The appeals court, made up of two judges appointed by former President Donald Trump and a judge 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 that Fearless simply – and categorically – refuses to accept applications from business owners who are not ‘black women,’” the court’s majority opinion said, adding that “all act of racial discrimination” would be considered expressive conduct. according to the Fearless Fund argument.

The appeals panel also rejected the Fearless Fund’s contention that Blum lacked standing because the lawsuit was filed on behalf of three unnamed women who failed to demonstrate that they were ” ready and able” to apply for the grant or that they had been harmed by the failure to respect their right. being to do it.

Judge Robin Rosenbaum, an Obama appointee, dissented in a scathing dissent, comparing the plaintiffs’ claims of harm to football players trying to win by “collapsing on the field, feigning an injury.” Rosenbaum said none of the plaintiffs demonstrated they had any real intent to apply for grants in what she called “broadcast statements” that were “eliminatory and devoid of substance.”

The court’s decision was not surprising because of its conservative leaning and previous skepticism of the argument presented by the Fearless Fund, said David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion, and Belonging at New York University Law School.

“We’re going to see pro-DEI results in liberal circuits and anti-DEI results in conservative circuits,” Glasgow said.

Glasgow said he expects one of the lawsuits to end up in the conservative-dominated Supreme Court. Nonetheless, he said it was unlikely that a single decision could settle the legal debate over corporate DEI due to the complexity and broad scope of the programs and policies that fall into this category.

The Strivers Grant Fund is one of several programs run by the founding arm of the Fearless Fund, which was founded to address the vast racial disparity in funding for businesses owned by women of color. Less than 1% of venture capital funding goes to businesses owned by Black and Hispanic women, according to the nonprofit advocacy group DigitalUndivided.

The National Venture Capital Association, a trade group with hundreds of member venture capital firms, filed an amicus brief defending the Fearless Fund grant program as a “small but important” step toward creating equality opportunities in an industry that has historically excluded black women.

Only 2% of investment professionals at venture capital firms were Black women in 2022, according to a study conducted every two years by Deloitte and Venture Forward, the nonprofit arm of the National Venture Capital Association, and the consulting firm Deloitte. According to a study of 315 companies with 5,700 employees, representing $594.5 billion in assets under management, only 1% of investment partners were Black women.

But in his statement, Blum said that “our nation’s civil rights laws do not permit racial distinctions because certain groups are overrepresented in various activities, while others are underrepresented.”

Philanthropic groups are also monitoring the case because of its possible implications for charitable giving.

“If legal rulings restrict people’s ability to give in a way that aligns with their values ​​or experience, it will harm not only philanthropy and nonprofits, but also our own country as a whole ” said Kathleen Enright, president and CEO of the association. Council on Foundations, whose organizations filed an amicus brief supporting the Fearless Fund with the independent nonprofit sector.