Arian Simone and Ayana Parsons, co-founders and CEOs of the Fearless Foundation, speak to reporters outside the Miami federal courthouse in January. A U.S. federal appeals court panel has halted the venture capital firm’s funding program for black female business owners, ruling that conservative groups are likely to prevail in their lawsuit claiming the program is discriminatory.
Rebecca Blackwell/AP
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Rebecca Blackwell/AP
NEW YORK — A U.S. federal appeals court panel has halted a venture capital firm’s funding program targeting black female business owners, ruling that a conservative group is likely to prevail in its lawsuit claiming the program is discriminatory.
The ruling against Atlanta-based Fearless Fund is another victory for a conservative group that has waged a massive legal battle against corporate diversity programs targeting dozens of companies and government agencies.
The lawsuit against the Fearless Fund was filed last year by the American Alliance for Equal Rights, a group led by Edward Blum, the conservative behind a Supreme Court case that ended affirmative action in college admissions. activist.
Bloom applauded the ruling, saying “programs that exclude certain individuals on the basis of race, such as the one designed and implemented by the Fearless Fund, are unjust and polarizing.”
Arian Simone, CEO and founder of Fearless Fund, said the ruling was “devastating” for the organizations in which it invests and the women it invests in.
“The message these judges sent today is that diversity has no place in corporate America, in education, or anywhere else,” she said in a statement. “These judges bought what a small group of white men was selling.”
Alphonso David, the fearless fund’s legal counsel and president and CEO of the Global Black Economic Forum, said all options are being evaluated to continue fighting the lawsuit.
Legal efforts to repeal workplace diversity programs have also suffered setbacks, reflecting the polarization between liberal and conservative judges on the issue. Last week, for example, a federal district judge in Ohio dismissed a lawsuit against insurance company Progressive and fintech platform Hello Alice that challenged a program that provided grants to help Black-owned small businesses purchase commercial vehicles. . Similar lawsuits against Amazon, Pfizer and Starbucks have been dismissed.
The case against the Fearless Fund has been closely watched by civil rights groups, charities, employment lawyers and the venture capital industry as a way of seeing how courts view programs designed to level the playing field for minorities and other groups that have historically suffered discrimination. weather vane.
A jury in the 11th U.S. Circuit Court of Appeals in Miami ruled 2-1 that Bloom was likely to prevail in a lawsuit claiming the funding program violated Section 1981 of the Civil Rights Act of 1866, which prohibits discrimination. female. The Reconstruction-era law was originally intended to protect formal slaves from economic exclusion, but anti-affirmative action activists have been using it to challenge programs designed to benefit minority-owned businesses.
The court ordered the Fearless Fund to suspend its Striver Grant Competition, which provides $20,000 to majority-Black women businesses, for the remainder of a lawsuit pending in federal court in Atlanta. The ruling overturned a federal judge’s ruling last year that the game should be allowed to continue because Bloom’s lawsuit was likely to fail. However, an independent panel of a federal appeals court quickly granted Blum’s request for an emergency injunction while he challenged a federal judge’s original order, and the grant competition has been suspended since October.
An appeals court panel composed of two judges appointed by former President Donald Trump and one judge appointed by former President Barack Obama rejected the Intrepid Foundation’s argument that the grants were not contracts but were subject to Article Charitable contributions protected by the First Amendment right to free speech.
“But the fact remains that Fearless simply and categorically refused to accept applications from non-‘black female’ business owners,” the court’s majority opinion said, adding that “every act of racial discrimination” will Considered expressive behavior in the terms of the Fearless Fund.
The appeals panel also rejected the Intrepid Fund’s argument that Blum was ineligible because the lawsuit, filed on behalf of three anonymous women, failed to prove they were “ready and able” to apply for the grants or that they were ignorant harmed by his behavior.
Judge Robin Rosenbaum, an Obama appointee, strongly dissented, likening the plaintiffs’ injury claims to football players trying to win by “falling down on the field and pretending to be injured.” Rosenbaum said none of the plaintiffs have proven they had any real intent to apply for the grants, which she called “cookie-cutter statements” that are “stale and lacking in substance.”
David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at New York University School of Law, said the court’s decision was not surprising given its conservative leanings and previous skepticism of arguments made by the Fearless Fund manner.
“We’re going to see some pro-DEI results in liberal circles and some anti-DEI results in conservative circles,” Glasgow said.
Glasgow said he expects one of the lawsuits to go before the conservative-dominated Supreme Court. Even so, he said any one ruling is unlikely to resolve the legal debate over corporate DEI because the category’s programs and policies are complex and wide-ranging.
The Strivers Grant Fund is one of several programs run by the Foundation arm of the Fearless Fund, which was established to address the wide racial disparities in funding for businesses owned by women of color. According to digitalundivided, a nonprofit advocacy group, less than 1% of venture capital goes to businesses owned by black and Hispanic women.
The National Venture Capital Association, a trade group with hundreds of member venture capital firms, filed an amicus brief defending the Fearless Fund funding plan as an effort to create equality in an industry that has historically excluded black women. A “modest but important” step towards opportunity.
By 2022, only 2% of investment professionals at venture capital firms will be black women, according to a study conducted every two years by Deloitte and Venture Forward, a non-profit organization of the American Venture Capital Association and consulting firm Deloitte. The study, which examined 315 firms with 5,700 employees and $594.5 billion in assets under management, showed that only 1% of investment partners are black women.
But Bloom said in a statement that “our nation’s civil rights laws do not allow for racial disparities because some groups are overrepresented and others underrepresented in a variety of activities.”
Charitable groups are also watching the case because of its possible impact on charitable giving.
“Legal decisions that limit people’s ability to give in ways that are consistent with their values or experiences harm not only philanthropy and nonprofits, but our entire country,” said Kathleen Enright, president and CEO of the Council.
