*This is not good news. In a landmark ruling, the Eleventh Circuit Court of Appeals has put a halt to the Fearless Fund’s initiative aimed at supporting Black women in business, marking a pivotal moment in the ongoing debate surrounding diversity, equity, and inclusion (DEI) programs in corporate America.
On Monday, a three-judge panel delivered a 2-1 decision, finding the Fearless Fund’s small business grant contest likely infringed upon the federal Civil Rights Act of 1866. This act forbids the consideration of race in contract formation.
The panel consisted of two Trump-appointed judges and one appointee of former President Barack Obama.
The ruling imposed a preliminary injunction against the grant program, overturning a previous decision by a lower court judge.
Origins of the Case
The conflict began in August 2023, when the conservative nonprofit American Alliance for Equal Rights filed a lawsuit against the Fearless Fund. Founded by Edward Blum, the same activist instrumental in the challenge against affirmative action in educational institutions, the Alliance contended that Fearless Fund’s grant contest, which awarded $20,000 to Black female entrepreneurs, was racially discriminatory.
The Alliance’s lawsuit argued that such grants violated Section 1981 of the Civil Rights Act of 1866, which prohibits race-based discrimination in contracts. They posited that by awarding funds exclusively to Black women, the Fearless Fund was engaging in illegal discriminatory practices.
Fearless Fund’s Response
Fearless Fund maintained that their grant program was not a contract but a charitable donation, thereby making it constitutionally protected under the First Amendment. The fund’s argument highlighted the chronic underfunding of Black women entrepreneurs.
Statistical support came from advocacy groups like Digitalundivided, which pointed out that between 2009 and 2017, only 0.0006% of venture capital funding went to Black women, while Black founders overall received roughly 1% of U.S. venture capital funding according to Crunchbase.
In September 2023, a district court in Georgia sided with the Fearless Fund, allowing the grant program to continue. The Alliance, however, quickly appealed, leading to the Eleventh Circuit’s intervention, reports The Atlanta Journal-Constitution.
The Legal Battle in the Appeals Court
In January, legal representatives from both sides presented their arguments to the appeals panel. Judge Kevin Newsom, appointed by former President Trump, wrote in the decision:
“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.”
In contrast, Judge Robin Rosenbaum, appointed by former President Obama, expressed her dissent, critiquing the Alliance’s portrayal of their members’ supposed injuries as exaggerations.
“But as American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field.”
Implications and Future Steps
The appellate court’s decision to halt the Fearless Fund’s grant program stands as one of the more prominent legal challenges to DEI initiatives within corporate America. The ruling has galvanized both supporters and detractors, marking a significant setback for those who advocate for tailored support programs aiming to rectify historical funding inequities.
Alphonso David, lawyer for the Fearless Fund, did not specify the fund’s next moves, but clearly stated the team’s commitment to defending their charitable endeavors.
As the legal landscape around DEI initiatives continues to evolve, this case underscores the contentious road ahead for programs structured around race and gender-specific support. The ultimate outcomes may significantly influence the future of targeted diversity initiatives across the corporate sector.
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