On Monday, June 3, 2024, the Eleventh Circuit of Appeals held that the "Fearless Strivers Grant Contest, an entrepreneurship funding competition open only to businesses owned by black women" was "substantially unlikely to enjoy First Amendment protection," and, most significantly, was "substantially likely to violate § 1981," "which prohibits private parties from discriminating on the basis of race when making or enforcing contracts." Based upon that determination, the Court ordered that the program be enjoined from proceeding.
Notably, this was a split decision by the court. The dissent opined that the plaintiff lacked standing to bring the lawsuit, as it "attempt[ed] to manufacture an 'injury' to allow American Alliance to challenge the Contest," and would have dismissed the lawsuit on that basis for a lack of jurisdiction. Such an analysis provides a road map for a further challenge to the plaintiff's standing (whether on an appeal to the entire Eleventh Circuit sitting en banc or to the Supreme Court), or, at the very least, illustrates an argument that possibly could be successfully employed by defendants in future cases under similar circumstances (perhaps in another circuit court of appeals).
Nonetheless, this decision has tremendous significance to corporate DEI programs, and constitutes an existential threat to certain types of initiatives. A federal court of appeals has now held that a contest limited to a particular minority group--in this case, to black women--constitutes a probable violation of a civil rights statute prohibiting racial discrimination as "individuals [] were excluded from the opportunity to compete in Fearless's contest solely on account of the color of their skin." Any similar program is now subject to challenge--and likely to be overturned--based on that same line of reasoning. Put bluntly, many corporate DEI initiatives will have to assess whether their current policies could run afoul of this ruling, and adjust accordingly.
A federal appeals court has blocked a venture fund's grant contest for Black women entrepreneurs in litigation spearheaded by affirmative action foe Edward Blum that challenged the program as racially discriminatory.
The grant contest is substantially likely to violate the federal ban on racial discrimination in legal contracts under Section 1981 of the 1866 Civil Rights Act, the US Court of Appeals for the Eleventh Circuit ruled 2-1 Monday. T
he split decision overturned a federal district court ruling that sided with Atlanta-based venture capital firm Fearless Fund Management LLC and found that its Fearless Strivers Grant Contest was likely protected by the First Amendment. The appeals court ruling marks a significant victory for Blum's American Alliance for Equal Rights, as well as similar conservative groups seeking to dismantle workplace diversity, equity, and inclusion initiatives through the courts.
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