A subsidy program for black women business owners is discriminatory, an appeals court has ruled

NEW YORK (AP) – A U.S. federal appeals court panel has suspended a enterprise capital firm’s grant program for Black women business owners, ruling that a conservative group is prone to prevail in its lawsuit arguing that the program is discriminatory.

The ruling against the Atlanta-based Fearless Fund is one other victory for conservative groups waging a large-scale legal battle against corporate diversity programs that focus on dozens of firms and government institutions.

The case against the Fearless Fund was brought last yr by the American Alliance for Equal Rights, a gaggle led by Edward Blum, the conservative activist behind the Supreme Court case that ended affirmative motion in college admissions.

Blum praised the ruling, saying that “programs that exclude certain people based on race, such as those designed and implemented by the Fearless Fund, are unfair and polarizing.”

Fearless Fund CEO and founder Arian Simone said the ruling was “devastating” for the organizations and women through which he invested.

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

Alphonso David, general counsel of Fearless Fund, who serves as president and CEO of The Global Black Economic Forum, said all options are being considered to proceed fighting the lawsuit.

Legal efforts to dismantle workplace diversity programs have also suffered some setbacks, reflecting polarized opinions amongst liberal and conservative justices on the problem. Last week, for example, a federal district judge in Ohio dismissed a lawsuit against insurance company Progressive and fintech platform Hello Alice, difficult a program that offered grants to assist Black-owned small businesses purchase industrial vehicles. Similar lawsuits have been dismissed against Amazon, Pfizer and Starbucks.

The case against Fearless Fund has been closely watched by civil rights groups, philanthropic groups, employment lawyers and the enterprise capital industry as a guide to how courts view programs geared toward equalizing opportunities for racial minorities and other groups which have historically faced discrimination. in enterprises and workplaces.

In a 2-1 ruling, a panel of the U.S. Court of Appeals for the eleventh Circuit in Miami said Blum was prone to prevail in her lawsuit, claiming the scholarship program violated Section 1981 of the Civil Rights Act of 1866, which prohibits sex discrimination. . the premise of race in enforcing contracts. Reconstruction-era laws were originally intended to guard formally enslaved people from economic exclusion, but anti-affirmative motion activists are using them to challenge programs designed to profit minority-owned businesses.

The court ordered the Fearless Fund to suspend its Strivers grant competition, which provides $20,000 to firms majority-owned by Black women, for the rest of the lawsuit pending in federal court in Atlanta. The ruling overturned a federal judge’s ruling last yr that the competition should proceed because Blum’s lawsuit would likely fail. However, the grant competition was suspended in October after a separate panel of a federal appeals court quickly granted Blum’s request for an emergency injunction while he was difficult 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 Fearless Fund’s arguments that the grants weren’t contracts but charitable donations protected by First Amendment rights to free speech.

Featured Stories

“The fact remains, however, that Fearless simply — and categorically — refuses to consider applications from business owners who are not ‘black women,’” the court’s majority opinion said, adding that “any act of racial discrimination” could be considered expressive conduct, in response to the argument Fearless Fund.

The appeals board also rejected the Fearless Fund’s claim that Blum lacked standing since the lawsuit was filed on behalf of three anonymous women who had not demonstrated that they were “ready and able” to use for the grant or that that they had been harmed by the inappropriate motion. is to do it.

Judge Robin Rosenbaum, an Obama appointee, disagreed, expressing a fierce dissent, likening the plaintiffs’ claims of harm to football players attempting to win by “flapping on the field, faking injuries.” Rosenbaum found that neither plaintiff had demonstrated that that they had an actual intention to use for the grants in the shape of what she called “cookie-cutter declarations” that were “trivial and devoid of substance.”

The court’s ruling was not surprising given its conservative bias and former skepticism of the Fearless Fund’s arguments, said David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging on the New York University School of Law.

“We will see some pro-DEI results in liberal circles and anti-DEI results in conservative circles,” Glasgow said.

Glasgow said he expected one in all the lawsuits to go to the conservative-dominated Supreme Court. Still, he said it is unlikely that a single ruling could resolve the legal debate surrounding corporate DEI due to complexity and wide-ranging programs and policies that fall under this category.

The Strivers Grant Fund is one in all several programs run by the founding division of the Fearless Fund, which was created to handle the wide racial disparities in funding for businesses run by women of color. According to the nonprofit group digitalundivided, lower than 1% of enterprise capital funding goes to firms owned by Black and Latina women.

The National Venture Capital Association, an industry group with a whole lot of member VC firms, has filed an amicus temporary defending the Fearless Fund grant program as a “modest but important” step toward ensuring equal opportunity in an industry that has historically excluded Black women.

In 2022, only 2% of investment professionals at enterprise capital firms were Black women, in response to a biennial study by Deloitte and Venture Forward, the nonprofit National Venture Capital Association and consulting firm Deloitte. The study, which included 315 firms with 5,700 employees and $594.5 billion in assets under management, found that just 1% of investment partners were Black women.

However, in his statement, Blum said that “our nation’s civil rights do not allow for racial disparities because some groups are overrepresented in various endeavors, while others are underrepresented.”

Philanthropic groups are also watching the case due to its possible implications for charitable giving.

“If legal decisions limit people’s ability to give back in ways that are consistent with their values ​​or experiences, it will harm not only philanthropy and nonprofits, but our entire country,” said Kathleen Enright, president and CEO of the Council on Foundations. whose organizations have filed a friendly temporary in support of the Fearless Fund with the Independent Sector nonprofit.