A US federal court of appeals panel has suspended Fearless Fund, an Atlanta-based, Black woman-owned venture capitalist firm, from continuing the firm’s Fearless Strivers Grant Contest, a grant program for Black female business owners.
In the 2-1 ruling, the panel of three judges, two appointed by Donald Trump and one appointed by Barack Obama, ruled that the grant program “is substantially likely to violate” section 1981 of the federal Civil Rights Act of 1866, which prohibits the use of race in making contracts. The act aimed to fully integrate formerly enslaved Black Americans as citizens, give them the full rights of American citizenship and to make it illegal to deprive any Americans of rights “on the basis of race, color, or prior condition of slavery or involuntary servitude”.
American Alliance for Equal Rights, founded by Edward Blum, the conservative activist who led the supreme court case that ended affirmative action in college admissions, brought the case against Fearless Fund last August. The fund is one of several firms, organizations and government institutions that have been targeted by conservative, rightwing groups working to make it illegal for public and private entities to pursue diversity initiatives.
Less than than 1% of venture capital funding goes to Black and Hispanic women-owned businesses, according to Digitalundivided, a non-profit advocacy organization. The group found that firms started by Black women received only .0006% of VC funding raised by startups between 2009 and 2017. And in 2019, a report found that “Black entrepreneur’s loan requests are three times less likely to be approved than white entrepreneurs”.
Section 1981 of the Civil Rights Act of 1866, which was referenced in the ruling, guarantees citizens the right “to make and enforce contracts … and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens”.
The panel of judges ruled that Fearless Fund is unlikely to enjoy first amendment protection and that its program “inflicts irreparable injury”.
The Fearless Fund CEO and founder Arian Simone expressed disappointment at the ruling.
“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,” she said in a statement. “On their behalf, we will turn the pain into purpose and fight with all our might.”
The ruling is a victory for conservative groups that continue to target diversity initiatives, but it may not be a cut and dry harbinger of what’s to come. Last week, a federal judge in Ohio dismissed a lawsuit against the insurance company Progressive and the fintech platform Hello Alice, which jointly offer a grant program that helps Black-owned small businesses purchase commercial vehicles.
In a statement, Simone vowed that the ruling against Fearless Fund was “the beginning of a renewed fight.
“We are committed more than ever to advocating for equity, pushing forward with resilience, and ensuring that women of color receive the opportunities they rightfully deserve,” the statement reads. Fearless Fund and the organization’s legal representatives have indicated that they are evaluating all options to fight the lawsuit.
