NEW YORK — A venture capital firm has ended a grant competition for Black women entrepreneurs as part of a settlement agreement with a conservative group that sued alleging the program was discriminatory, the parties announced Wednesday.
The settlement came two months after a U.S. federal appeals court panel ordered Atlanta-based Fearless Fund to suspend the Strivers Grant Contest, which provided $20,000 to majority-black women-owned businesses. In a 2-1 ruling, the appeals court ruled that the American Alliance for Equal Rights, led by conservative activist Ed Blum, would likely prevail in its lawsuit alleging that the program illegally discriminated on the basis of race.
The lawsuit against Fearless Fund, the Atlanta-based firm that has helped grow popular businesses like beauty retailer Thirteen Lune and restaurant chain Slutty Vegan, is being closely watched as a harbinger of the growing legal battle waged by conservative groups against corporate diversity programs.
Strengthened by the Supreme Court ruling ending affirmative action In college admissions, conservatives have targeted dozens of corporations and government agencies and challenged a wide range of programs and policies that promote diversity, equity, and inclusion (also known as DEI).
In a statement, Blum, who also filed the case that resulted in the affirmative action ruling, reiterated his position that “programs focused solely on race, such as those promoted by the Fearless Fund, 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 company’s mission to “help and empower women entrepreneurs of color in need.”
So far, none of the anti-DEI lawsuits have resulted in a precedent-setting ruling on the level of the Supreme Court’s decision on affirmative action. Ben Crump, a civil rights attorney who represented the Fearless Fund, said the settlement allowed the lawsuit to end without setting such a precedent.
“By strategically avoiding a Supreme Court ruling that could have eliminated race-based funding, we protected critical opportunities for the entire Black and brown community,” Crump said in a statement.
Yet the number of companies is growing – most recently including Lowe’s and John Deere — have changed or shut down DEI programs due to the flood of lawsuits and pressure from conservative activists.
In a statement, Blum said, “It is hoped that race-exclusionary programs like the Fearless Fund’s will be stopped and opened up to everyone, regardless of race.” Blum added that he had encouraged the Fearless Fund to open the Strivers Grant Contest to women of other races instead of closing it. Other companies, including several law firms sued by Blum, have changed grants or fellowships to be open to all races.
Alphonso David, president and CEO of The Global Black Economic Forum and an advisor to the Fearless Fund, fired back in an interview with The Associated Press that the “Fearless Fund would not allow Ed Blum to dictate how their business should be run.” David said the Strivers Grant was a small part of the Fearless Fund’s operations and was already scheduled to wind down. He said the settlement “is very limited” and will not affect the venture capital firms’ investments or other activities.
The Strivers Grant Fund was one of several programs run by the founding arm of the Fearless Fund, which was established with support from investors including JPMorgan Chase & Co. and Mastercard, to address the stark 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 $5,000 to $250,000 to “underserved founders.”
David Glasgow, director of the Meltzer Center for Diversity, Inclusion, and Belonging at New York University Law School, said the decision to settle the lawsuit was not surprising because “the gamble you take in these kinds of cases is that if you keep fighting, you’re going to get more adverse rulings that have the potential to cause greater harm.”
“People are certainly seeing the beginnings of how the conservative six-justice supermajority on the Supreme Court would rule on DEI-related cases,” Glasgow said.
The Fearless Fund case and other lawsuits have exposed deep divisions within the country’s judiciary over 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 subsidy program violates Section 1981 of the Civil Rights Act of 1866which prohibits racial discrimination in the enforcement of contracts. The Reconstruction-era law was originally intended to formally protect enslaved people from economic exclusion, but anti-affirmative action activists have used it to challenge programs that were intended to benefit minority-owned businesses.
Judge Robin Rosenbaum, an appointee of former President Barack Obama, sharply ruled that none of the anonymous plaintiffs Blum represented had shown any real intent to apply for the grants. He compared their claims for damages to those of football players who try to win by “plopping down on the field and faking an injury.”
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