NEW YORK – A venture capital firm has closed down a grant contest for Black women business owners as part of a settlement agreement with a conservative group that had filed a lawsuit alleging the program was discriminatory, both sides announced Wednesday.
The settlement came two months after a U.S. federal court of appeals panel ordered the Atlanta-Based Fearless Fund to suspend the Strivers Grant Contest, which provided $20,000 to businesses that are majority owned by Black women. In a 2-1 ruling, the appeals court ruled that the American Alliance for Equal Rights, led by conservative activist Ed Blum, was likely to prevail in its lawsuit claiming that the program illegally discriminated on the basis of race.
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The lawsuit against the Fearless Fund, the Atlanta-based firm that has helped grow popular companies like beauty retailer Thirteen Lune and restaurant chain Slutty Vegan, has been closely watched as a bellwether in the growing legal battle waged by conservative groups against corporate diversity programs.
Bolstered by the Supreme Court case that ended affirmative action in college admissions, conservatives have targeted dozens of companies and government institutions and challenged a wide array of programs and policies bolstering diversity, equity and inclusion, known as DEI.
In a statement, Blum, who also brought the case that resulted in the affirmative action ruling, reiterated his view that “race-exclusive programs like the one the Fearless Fund promoted are divisive and illegal."
In a statement, Arian Simone, CEO and co-founder of the Fearless Fund, said she was pleased to put the lawsuit behind her and continue with the firm’s mission of “helping and empowering women of color entrepreneurs in need.”
So far, none of the anti-DEI lawsuits have resulted in a precedent-setting ruling on the level of the Supreme Court decision on affirmative action. Ben Crump, a civil rights attorney who represented the Fearless Fund, said that the settlement ensured that lawsuit ended without setting any such precedent.
“By strategically avoiding a Supreme Court ruling that could have eliminated race-based funding, we protected vital opportunities for the entire Black and brown community,” Crump said in a statement.
Still, a growing number of companies — most recently including Lowe's and John Deere — have altered or dropped DEI programs amid the onslaught of lawsuits and conservative activist pressure.
In statement, Blum said “it is to be hoped race-exclusive programs like the one offered by the Fearless Fund will be stopped and opened to everyone, regardless of their race.” Blum added that he had encouraged the Fearless Fund to open the Strivers Grant Contest to women of other races rather than shut it down. Other companies, including several law firms sued by Blum, have changed scholarships or fellowships to open it to all races.
Alphonso David, president and CEO of The Global Black Economic Forum and counsel to the Fearless Fund, shot back in an interview with The Associated Press that the “Fearless Fund was not going to allow Ed Blum to dictate how to run their business.” David said the Strivers Grant was a small part of the Fearless Fund's operations and had already been scheduled to wind down. He said the settlement “is very narrow” and will not affect the venture capital's firms investments or other activities.
The Strivers Grant Fund was one of several programs run by the foundation arm of the Fearless Fund, which was founded with backing from investors including JPMorgan Chase & Co. and Mastercard, to address the wide racial disparity in funding for businesses owned by women of color. In her statement Wednesday, Simone announced a new $200 million debt fund that will offer loans of between $5,000 to $250,000 to “under-resourced founders.”
David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion, and Belonging at New York University’s School of Law, said the decision to settle the lawsuit was not surprising because “the gamble you are making in cases like this is that if you continue fighting you will get more adverse rulings that have the potential to cause wider damage.”
“People are certainly seeing the writing on the wall on how the six-justice conservative super majority in the Supreme Court would rule in DEI-related cases,” Glasgow said.
The Fearless Fund case and other lawsuits have revealed deep divisions among the country's judiciary on the issue of DEI.
Two judges, appointed by former President Donald Trump to the U.S. Court of Appeals for the 11th Circuit in Miami, sided with Blum's argument that the grant program violates section 1981 of the 1866 Civil Rights Act, which prohibits discrimination on the basis of race when enforcing contracts. The Reconstruction-era law was originally intended to protect formally enslaved people from economic exclusion, but anti-affirmative action activists have been leveraging it to challenge programs intended to benefit minority-owned businesses.
In sharp dissent, Judge Robin Rosenbaum, an appointee of former President Barack Obama, said none of the anonymous plaintiffs represented by Blum demonstrated that they had any real intention to apply for the grants and likened their claims of harm to soccer players trying to win by “flopping on the field, faking an injury.”
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