Co-founders and CEOs of The Fearless Fund, Arian Simone and Ayana Parsons, speak to journalists outside the federal courthouse in Miami in January. The US Court of Appeals for the Federal Circuit suspended the public funding program venture capital firm for Black women business owners, ruling that a conservative group is likely to prevail in a lawsuit claiming the program is discriminatory.
Rebecca Blackwell/AP
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Rebecca Blackwell/AP
NEW YORK – The U.S. Court of Appeals for the Federal Circuit has suspended a venture capital firm’s funding program for Black women business owners, ruling that a conservative group is likely to prevail in the case. The lawsuit claims that this program is discriminatory.
The ruling against the Atlanta-based Fearless Fund is another victory for conservative groups waging a sweeping legal battle against corporate diversity programs targeting dozens of companies and organizations. government office.
The lawsuit against the Fearless Fund was brought last year by the American Coalition for Equal Rights, a group led by Edward Blum, the conservative activist behind the Supreme Court case to end the practice. Affirmation in college admission.
Blum welcomed the ruling, saying that “programs that exclude certain individuals because of their race, such as those that the Fearless Foundation has designed and implemented, are unjust and polarizing. “
Fearless Fund CEO and founder Arian Simone said the ruling was “devastating” for the organizations and women the fund invests in.
“The message these justices sent today is that diversity in Corporate America, education or anywhere else should not exist,” she said in the statement. “These judges bought what a small group of white people were selling.”
Alphonso David, legal counsel for the Fearless Fund and president and CEO of the Global Black Economic Forum, said all options are being evaluated to continue fighting the lawsuit .
Legal efforts to dismantle workplace diversity programs have also faced numerous obstacles, reflecting polarized views between liberal and conservative justices on the issue. For example, last week, a federal district judge in Ohio dismissed a lawsuit against insurance company Progressive and fintech platform Hello Alice challenging a program that provides grants to help small businesses in the US. Black ownership of 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 clear demonstration of how courts view programs aimed at creating Level the playing field for racial minorities and other groups has a long history. face discrimination in business and the workplace.
In a 2-1 decision, a panel of the U.S. Court of Appeals for the 11th Circuit in Miami found that Blum was likely to prevail in his case that the grant program violated section 1981 of the Civil Rights Act of 1866. , prohibits discrimination on the basis of race in the enforcement of contracts. The Reconstruction-era law was originally intended to protect formally enslaved people from economic exclusion, but anti-affirmative action activists have used it to challenge programs intended to benefit for minority-owned businesses.
The court ordered the Fearless Foundation to suspend the Strivers Grant Competition, which provides $20,000 to businesses majority-owned by Black women, for the remainder of the case, which is being litigated in court. federal court in Atlanta. The ruling overturned a federal judge’s ruling last year that the contest should be allowed to proceed because Blum’s lawsuit was likely to fail. However, the funding dispute has been suspended since October after a separate panel of the federal appeals court quickly granted Blum’s request for an emergency injunction while he challenged the court’s initial order. federal judge.
The appeals court panel, which included two judges appointed by former President Donald Trump and one appointed by former President Barack Obama, rejected the Fearless Foundation’s argument that the grants were not contracts that are charitable contributions protected by the First Amendment’s free speech rights.
“The reality, however, is that Fearless simply — and flatly — refused to accept applications from business owners who were not ‘black women,’” the court’s majority opinion said. , the court’s majority opinion said, adding “any act of racial discrimination” would be considered expressive conduct under the Fearless Fund’s argument.
The appeals panel also rejected the Fearless Foundation’s argument that Blum did not have standing because the lawsuit was filed on behalf of three anonymous women who had failed to demonstrate that they were “willing and able” apply for benefits or they have been harmed by not having to do so.
Justice Robin Rosenbaum, an Obama appointee, dissented in a scathing dissent, likening the plaintiffs’ claims to harm to football players trying to win by “lying on the field, pretending to be injured”. Rosenbaum said none of the plaintiffs had demonstrated that they intended to actually apply for benefits under what she called a “cookie-cutter claim” that was “thread and devoid of 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 ruling was not surprising given its conservative bias and skepticism toward here to the argument put forward by the Fearless Foundation.
“We will see some pro-DEI results in liberal circuits and anti-DEI results in conservative circuits,” Glasgow said.
Glasgow said he hopes one of the cases will reach the conservative-dominated Supreme Court. Even so, he said it’s unlikely any ruling could resolve the legal debate over corporate DEI because of the complexity and wide-ranging programs and policies that fall under this category .
The Strivers Grant Fund is one of many programs run by the founding organization of the Fearless Fund, which was established to address major racial disparities in funding for businesses owned by women of color . According to the nonprofit advocacy group digitalundivided, less than 1% of venture capital funding goes to businesses owned by black and Hispanic women.
The National Venture Capital Association, a trade group with hundreds of member VC firms, filed a brief defending the Fearless Fund’s funding program as a “modest but important” step. ” to create equal opportunity in an industry that has historically excluded Black women.
According to a biennial study conducted by Deloitte and Venture Forward, the nonprofit arm of the National Venture Capital Association, and consulting firm Deloitte, only 2% of investment professionals at companies venture capitalists are black women by 2022. According to the study, only 1% of investing partners are black women, surveying 315 companies with 5,700 employees, representing 594.5 million in assets billion USD under management.
But in his statement, Blum said “our nation’s civil rights laws do not permit racial discrimination because some groups are overrepresented in a variety of efforts, while others are underrepresented.” represent.”
Charity groups are also monitoring the case because of its possible impact on charity work.
“If regulatory decisions limit people’s ability to make commitments that are consistent with their values or experiences,” said Kathleen Enright, president and CEO of the Council on Regulatory Affairs, , that would hurt not only philanthropy and nonprofits but also our country.” Organized organizations filed an amicus brief supporting the Fearless Fund with the Independent Nonprofit Sector.
