(Georgia Recorder) — An Atlanta-based venture capital fund aimed at supporting Black women will need to put its grant program on hold after a three-judge panel from the federal Eleventh Circuit Court of Appeals ruled 2-1 that the fund likely violates federal law against considering race when making contracts.
A conservative nonprofit led by the anti-affirmative action activist who was behind the U.S. Supreme Court ruling that struck down race-conscious college admission policies sued Fearless Fund and its foundation in federal court last year.
“The American Alliance for Equal Rights is grateful that the court has ruled that the Fearless Fund’s racially exclusive grant competition is illegal. Our nation’s civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented,” said Edward Blum, president of the alliance.
“Programs that exclude certain individuals because of their race such as the ones the Fearless Fund has designed and implemented are unjust and polarizing,” he added. “Significant majorities of all Americans believe that an individual’s race should not be a factor in our nation’s public policies.”
Jason Schwartz, partner at the Washington, D.C.-based Gibson, Dunn and Crutcher law firm, and Alphonso David, president and CEO of the Global Black Economic Forum, said Monday’s ruling represents a departure from precedent and vowed to keep up the fight.
“The majority ruled that a 1866 law designed to provide economic freedom to newly-freed slaves actually prohibits the Fearless Foundation from providing grants to Black women. We disagree. As the dissenting judge pointed out, the discrimination in access to funding that Fearless Foundation seeks to address is long-standing and irrefutable,” they wrote in a joint statement.
“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. The dissenting judge, the district court and other courts have agreed with us that these types of claims should not prevail. This is not the final outcome in this case; it is a preliminary ruling without a full factual record. We are evaluating all of our options.”
Judges Kevin Newsom and Robert Luck, both appointees of former president Donald Trump, sided with the alliance, while Judge Robin Rosenbaum, appointed by former president Barack Obama, dissented.
At issue was a contest offered by Fearless Fund with a $20,000 prize plus training and mentorship to Black woman-owned businesses judged to have high potential for success.
The alliance sued the fund in 2023 on behalf of three members, women business owners who said they were ready to apply for the contest but are not Black.
The fund’s lawyers argued that the contest’s rules did not constitute a contract and that the organizers have a First Amendment right to spend money how they wish.
The majority of judges referenced Runyon v. McCrary, a 1976 landmark Supreme Court case barring racial segregation in private schools. In that case, the justices ruled that while speech promoting segregation is protected speech, the practice of excluding a racial group is not.
“Fearless characterizes its contest as reflecting its ‘commitment’ to the ‘[b]lack women-owned business community. The fact remains, though, that Fearless simply—and flatly— refuses to entertain applications from business owners who aren’t ‘black females,’” Newsom wrote in the majority opinion.
“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,” he added. “And on Fearless’s theory, the more blatant and rampant the discrimination, the clearer the message.”
Rosenbaum saw things differently. She was skeptical of the alliance members who said they were ready to apply for the contest, comparing them to soccer players who exaggerate an injury in an attempt to deliver a penalty to the other team, also known as flopping.
She was suspicious that the three owners were anonymous, gave very few details about their businesses and did not demonstrate that they had an actual desire to enter the contest or had ever attempted to enter any similar grant competition.
“Here, no one doubts the sincerity of American Alliance for Equal Rights’s desire to challenge what it views as ‘distinctions and preferences made on the basis of race and ethnicity,’” Rosenbaum wrote in her dissent. “American Alliance seeks to do so by challenging the Fearless Foundation’s Striver’s Grant Contest designed to help Black women in the business world, where they are grossly underrepresented as business owners. But as American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field.”
In 2021, business data company Crunchbase found that Black female startup founders received just 0.34% of the total venture capital spent in the U.S. that year.
State Rep. Dar’shun Kendrick, an Atlanta Democrat and frontline policy advocate for the Fearless Fund, said when Black women get the money to make their business dreams a reality, the benefits go well beyond her pocketbook.
“When you invest in a Black woman founder, you invest in an entire community. Full stop,” she said. “We are mothers, sisters, wives, caretakers, the ones volunteering down the street, et cetera. An investment in a Black woman founder is an investment in all of America, but those who want to hold on to undeserved power can’t see that. It’s unfortunate and frustrating.”
Georgia Recorder Deputy Editor Jill Nolin contributed to this report.
