Federal Court blocks Fearless Fund from awarding business grants to Black women

BY Preta Peace Namasaba June 11, 2024 3:45 PM EDT
Black-owned venture capitalist firms are empowering entrepreneurs. Photo credit: NNPA Newswire

In a 2-1 ruling, the panel of the U.S. Court of Appeals for the 11th Circuit in Miami has blocked the Fearless Fund from making grants to Black women-owned businesses. The court ordered the organization to suspend its Strivers Grant Contest, which provides $20,000 to businesses that are majority-owned by Black women as the case continues to be litigated. It reversed a federal judge’s ruling from last year which held that the contest should be able to continue since the lawsuit was expected to fail. The case embodies a growing contest over corporate diversity policies.

“I am shattered for every girl of color who has a dream but will grow up in a nation determined not to give her a shot to live it. On their behalf, we will turn the pain into purpose and fight with all our might. America is supposed to be a nation where one has the freedom to achieve, the freedom to earn, and the freedom to prosper. Yet, when we have attempted to level the playing field for underrepresented groups, our freedoms were stifled,” Arian Simone, founder and CEO of the Fearless Fund said of the judicial decision.

Led by Circuit Judge Kevin Newsom, the panel concluded that Fearless Fund’s program did not warrant speech protections under the U.S. Constitution’s First Amendment. The judges ruled that the grant program is “substantially likely to violate” the provisions of Title 42 of the US Code, which ensures equal rights under the law and prohibits the use of race when awarding and enforcing contracts. They consequently ordered a federal court in Georgia to enter a preliminary injunction blocking the fund from closing its grant application process while the case is in court.

In a dissenting opinion, Judge Robin Rosenbaum equated the plaintiffs’ claims of harm to soccer players flopping on the field and faking an injury to sway referees. She said that none of the plaintiffs demonstrated that they had any real intention to apply for the grants.

“As American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field. Although three of American Alliance’s members pay lip service to the idea they are ‘ready and able’ to participate in Fearless Contest, their declarations show, in context, that none has a genuine interest in actually entering the Contest,” Rosenbaum wrote in the opinion.

Edward Blum, the founder of The American Alliance for Equal Rights founder applauded the ruling, describing the Fearless’ grant programs as unjust and polarizing. The conservative nonprofit sued the organization over its Fearless Strivers grant contest alleging the grant program violates Section 1981 of the Reconstruction-era Civil Rights Act of 1866, which prohibits discrimination based on race when making and enforcing contracts. The Alliance argued the grants are racially discriminatory because they are only for Black women and the Fearless Fund is entering into a contract with the applicant. Blum was behind the group that successfully challenged affirmative action in colleges and universities.

“Our nation’s civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented. Programs that exclude certain individuals because of their race such as the ones the Fearless Fund has designed and implemented are unjust and polarizing. Significant majorities of all Americans believe that an individual’s race should not be a factor in our nation’s public policies,” Blum said in a statement.

Arian Simone, founder and CEO of the Fearless Fund described the ruling as “devastating” for the organizations and the women it has invested in. She co-founded the firm in 2019 to close the gap in venture capital funding by investing in scalable, growth-aggressive companies led by women of color at the pre-seed, seed level, or series A financing level. It has since backed prominent companies such as the restaurant chain Slutty Vegan and the beauty brand Live Tinted. In addition to its Fearless Strivers Grant Contest, Fearless has other programs such as The Get Ready Venture Program. The venture capital firm will continue supporting and providing resources to underrepresented communities while it fights the lawsuit.

Fearless Fund’s legal battle is not an isolated incident. In recent months, there have been challenges to diversity, equity, and inclusion (DEI) programs in corporate America, schools, and higher education. This case will set a precedent for how the courts handle programs aimed at promoting equality for racial minorities and other groups that have historically faced discrimination in businesses and workplaces.