The Fearless Fund suit is heating up in Atlanta’s 11th Circuit.
A panel of three appellate judges on Saturday temporarily blocked Fearless Fund from awarding its $20,000 Fearless Strivers Grant to Black women entrepreneurs as the lawsuit filed against it makes its way through the courts.
The American Alliance for Equal Rights (AAER), led by Edward Blum, who was behind the efforts to overturn affirmative action, sued Fearless Fund in August, alleging that its Strivers Grant program discriminates against non-Black women. Judge Robert Luck and Andrew Brasher, both appointed by President Donald Trump, agreed with the AAER, calling the grant “racially exclusionary” and said it likely violated Section 1981 of the Civil Rights Act of 1866, which barred racial discrimination in contracts.
But another judge, Judge Charles Wilson, who was appointed by Bill Clinton, dissented and criticized the AAER for “weaponizing” the Civil Rights Act of 1866, as it was initially targeted to help the formerly enslaved. “AAER fails as an organization bringing a Section 1981 claim on behalf of white members. The inclusion of Asian business owners, while a racial minority, does not cure the inclusion of white business owners,” Wilson wrote in his dissent.
The ruling halts the grant process until a separate panel of judges decides whether the Strivers Grant can be deployed while the suit is played out in district courts. There is no date on when that panel of judges will convene.
Last week, Clinton-appointed Judge Thomas Thrash initially denied the AAER’s request to halt the Strivers Grant and said the fund was protected under the First Amendment because its deployment counted as charitable giving. The AAER then filed an emergency motion to appeal that decision, leading to the three-judge panel that eventually overturned Thrash’s ruling 2-1.
Alphonso David, Fearless Fund’s legal counsel and CEO of the Global Black Economic Forum, released a statement saying the fund and its legal team “respectfully disagree with this Court’s decision, appreciate the important points raised by the dissent, and look forward to further appellate review.” He added, “We remain committed to defending the meaningful work of our clients.”
“The members of the American Alliance for Equal Rights are gratified that the 11th Circuit has recognized the likelihood that the Fearless Strivers Grant Contest is illegal. We look forward to the final resolution of this lawsuit,” Blum told TechCrunch.
The website to apply to the Fearless Strivers Grant was taken down as of Saturday.
Meanwhile, experts and industry insiders following the case remain dumbfounded as it continues to unfold. Thomas Dorwart, founder of his law firm Thomas C. Dorwart Law, agreed with Wilson’s dissent. The whole point of Section 1981 was to protect Black Americans from economic disparity and discrimination after the Civil War and Reconstruction, giving them the opportunity to engage in the same contracts as white Americans, he said.
“The whole purpose of the statute is turned on its head by the argument of the plaintiff, and it is a perversion, the Justice says, to apply it this way because it’s actually supposed to do what Fearless Fund is doing, which is to provide economic opportunity for Black Americans,” he said.
And that’s especially useful, given the fact that less than 1% of all venture capital goes to Black women and less than 2% goes to Black founders overall. Dorwart is doubtful that Fearless Fund can now win in the 11th Circuit, given that it is a conservative court. Already, as seen with the preliminary injunction, the issue has split along party lines.
“It’ll eventually go to the Supreme Court, and maybe there’s a bit of a chance there,” he said, pointing out the fact that there are a few moderate Supreme Court justices.
TechCrunch previously reported nervousness throughout the ecosystem. Funds that focus on backing founders of color are wondering what will happen to them as overall exasperation spreads throughout the Black tech community. Chauntelle Lewis, a diversity advisor within the U.K. tech landscape, said Black eyes abroad are even following the case, as the U.S. ecosystem serves as a signal for the European market.
“While nobody will explicitly utter the words, ‘we’re no longer investing in Black initiatives because the majority of the U.S. no longer cares,’ that sentiment seems to be lurking beneath the surface,” she said. “We built our own tables, and now it seems like everyone is cutting off the legs.”