Legal Advocacy Group Challenges Minority-Aimed Grant Program

A legal advocacy group led by Edward Blum says a Texas nonprofit’s grant program for women and minorities violates federal law, part of a recent spate of legal challenges to programs aimed at promoting diversity.

The American Alliance for Equal Rights is suing Austin-based Hidden Star on behalf of a white male over a Hidden Star program the Alliance says offers $2,750 to entrepreneurs who are “confirmable ethnic minorit[ies] or female[s],” according to a complaint filed Monday in the US District Court for the Western District of Texas. AAER alleges the program amounts to illegal discrimination under Section 1981 of the Civil Rights Act of 1866, a Civil War-era anti-discrimination statute.

“Between two male applicants—one black and one white—the latter cannot apply because he is the wrong race,” the complaint says. “This kind of rank discrimination was never lawful.”

The deadline to enter the grant contest is March 31, 2024, the complaint says.

Founded in 2021, AAER is a “nationwide membership organization” “dedicated to ending racial classifications and racial preferences in America,” according to the complaint. Blum, a conservative activist, is the group’s president.

AAER has brought similar lawsuits against business and law firm diversity programs. The US Court of Appeals for the Eleventh Circuit last year ordered a pause on an Atlanta venture fund’s grants for Black women entrepreneurs in a case brought by the AAER, disagreeing with a lower federal court that denied AAER’s request for an injunction. The Eleventh Circuit heard oral arguments in that case last month.

The lawsuit follows the June 2023 US Supreme Court ruling that struck down affirmative action in college admissions, which AAER quotes in its complaint.

AAER is suing Hidden Star under under 42 U.S.C. §1981. The group is seeking a declaratory judgment that Hidden Star’s grant Program, “as currently constituted,” violates Section 1981; a temporary restraining order and preliminary injunction barring Hidden Star from closing the current application period, selecting grant recipients, or enforcing the program’s eligibility requirements; a permanent injunction “barring enforcement of Defendant’s racially discriminatory eligibility criteria;" $1 in nominal damages; attorneys’ fees; and costs.

Hidden Star declined to comment.

Consovoy McCarthy PLLC represents AAER.

The case is American Alliance for Equal Rights v. Hidden Star, W.D. Tex., 1:24-cv-00128, complaint 2/5/24.