Court of Appeals Rules Against Fearless Fund’s Grant For Black Women

An Eleventh Circuit Court of Appeals panel has suspended Fearless Fund’s grant program for Black women with small businesses.

The judges, in a 2-1 ruling, said the Fearless Fund’s contest likely violates the federal Civil Rights Act of 1866, which prohibits using race in making contracts. They also stated that the Fearless Fund is unlikely to enjoy First Amendment protection and that its program inflicts irreparable harm.

The three-man judge panel consisted of two judges appointed by former President Donald Trump and another appointed by former President Barack Obama.

The case is one of the more prominent legal challenges on DEI programs in corporate America, and today’s ruling is a setback for supporters of those initiatives.

Origin of The Lawsuit Against Fearless Fund

This lawsuit was brought in August 2023 by the American Alliance for Equal Rights (AAER), a conservative nonprofit against Fearless’ Strivers grant contest, which awarded $20,000 in small business grants to Black women. 

The Alliance, founded by Edward Blum, alleged that 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. AAER argued that Fearless is entering into a contract with the applicant, and because the grants are only for Black women, it’s racially discriminatory.

“Our nation’s civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented,” Blum said in a statement. “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.”

But Fearless argued it’s not actually a contract; rather, it’s a charitable donation, and that type of giving is protected under the First Amendment. Historically, Black women entrepreneurs receive a fraction of what other founders get. Between 2009 and 2017, only 0.0006% of VC funding went to businesses started by Black women, according to nonprofit advocacy group Digitalundivided. Black founders — men and women — receive only about 1% of U.S. venture capital funding, according to Crunchbase.

Feedback On The Verdict

Alphonso David, an attorney for Fearless Fund, said the group is evaluating the next legal steps. “The majority ruled that an 1866 law designed to provide economic freedom to newly-freed slaves actually prohibits the Fearless Foundation from providing grants to Black women. We disagree,” David said in a statement. 

“As the dissenting judge pointed out, the discrimination in access to funding that Fearless Foundation seeks to address is long-standing and irrefutable.  This is the first court decision in the 150+ year history of the post-Civil War civil rights law that has halted private charitable support for any racial or ethnic group.”

In September 2023, a district court judge in Georgia ruled against the Alliance and allowed the grant program to continue. The group immediately appealed, and the Eleventh Circuit paused the program while the case was pending.

In January this year, the Fearless Fund and the Alliance made their case to the appeals panel.

“The fact remains, though, that Fearless simply—and flatly— refuses to entertain applications from business owners who aren’t ‘black females.’ If that refusal were deemed sufficiently ‘expressive’ to warrant protection under the Free Speech Clause, then so would be every act of race discrimination, no matter at whom it was directed,” Judge Kevin Newsom, a Trump appointee, wrote in Monday’s decision.

But Judge Robin Rosenbaum, an Obama appointee, compared the Alliance to athletes faking injuries to sway referees in her dissent.

“But as American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field,” she wrote.

Related Post: Court Blocks Fearless Fund From Awarding $20K Grants to Black Women Founders

About Fearless Fund

Fearless Fund invests in women-led businesses seeking pre-seed, seed level, or series A financing. It is the nation’s first venture capital (VC) firm run by women of color that invests exclusively in tech and consumer goods companies owned by women of color.

Led by Arian Simone and Ayana Parsons, Fearless Fund has enjoyed support from institutional investors such as J.P. Morgan Chase, Bank of America, Mastercard, Ally Bank, and more.

The Fund has championed economic empowerment and opportunity for women of color. Their flagship initiative, the Fearless Strivers Grant Contest, has provided substantial financial support to Black women entrepreneurs, with awards reaching up to $20,000.