Eleventh Circuit Blocks Venture Fund’s Grants for Black Women

A venture capital foundation’s grant program for businesses run by Black women was prohibited from closing its application window Sept. 30 or picking a winner until further ordered, a split Eleventh Circuit ruled.

The American Alliance for Equal Rights has established that the Fearless Fund’s racially exclusionary program—the Fearless Strivers Grant Contest—is substantially likely to violate 42 U.S.C. § 1981, the US Court of Appeals for the Eleventh Circuit said in an order issued Sept. 30.

American Alliance sued Fearless Fund on behalf of three White and Asian women, arguing that the program violates § 1981, which bans racial discrimination in contracting. A trial judge Sept. 26 denied the American Alliance’s motion for a preliminary injunction that would have prevented the foundation from awarding grants until the lawsuit is decided.

American Alliance appealed the same day and asked the court to block Fearless Fund from closing its application window or selecting a winner until the court has ruled on its motion for a preliminary injunction.

The venture fund’s contest awards $20,000 to winners. The program’s focus on Black women is an “explicit racial exclusion” that violates federal civil rights laws, the suit said.

American Alliance is backed by Edward Blum, a conservative activist who was instrumental in the recent lawsuit that led to a landmark US Supreme Court decision striking down affirmative action in higher education.

The American Alliance is also suing two white-shoe law firms over their diversity-fellowship programs.

The panel disagreed with the district court’s rationale that § 1981 was likely unconstitutional under the First Amendment as applied to Fearless Fund. The defendants don’t provide “expressive services” or otherwise engage in “pure speech,” the court said.

Although the First Amendment protects Fearless Fund’s right to promote beliefs about race, it doesn’t give them the right to exclude persons from a contractual regime based on their race, the court said.

The per curiam order was joined by Judges Robert J. Luck and Andrew L. Brasher, both appointed by former President Donald Trump.

Judge Charles R. Wilson—a former president Bill Clinton appointee—dissented, saying he can’t say the district court abused its discretion in denying American Alliance’s motion.

American Alliance fails as an organization bringing a § 1981 claim on behalf of White business owner, Wilson said. The inclusion of Asian business owners, while a racial minority, doesn’t cure the inclusion of White business owners, he said.

“We respectfully disagree with this Court’s decision, appreciate the important points raised by the dissent, and look forward to further appellate review,” Alphonso David, president and CEO of the Global Black Economic Fund said Sept. 30 in an emailed statement.

Chambliss & Fawcett LLP and Consovoy McCarthy PLLC represent American Alliance. Gibson Dunn & Crutcher LLP, Alston & Bird LLP, Ben Crump Law PLLC, Katten Muchin Rosenman LLP represent Fearless Fund.

The case is Am. All. for Equal Rights v. Fearless Fund Mgmt. LLC, 11th Cir., No. 23-13138, 9/30/23.