The federal appeals court in Atlanta overturned a lower court ruling that allowed the fund to continue fighting the grants while the litigation was ongoing.
The case is being closely watched because of its potential impact on race-sensitive programs in the private sector, particularly in the world of grants and foundations. Observers have positioned it as a central legal battle over civil rights and affirmative action, and it has received support from groups on both sides of the issue.
“This is the first ruling in the more than 150-year history of post-Civil War civil rights law to block private charitable support to a racial or ethnic group,” Jason Schwartz, an attorney at Gibson, Dunn & Crutcher who represents the Fearless Fund, said in an emailed statement to The Washington Post. “The dissenting judges, the district court and other courts agree with us that these types of claims should not be allowed.”
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Schwartz added that Fearless Fund and its legal team are “evaluating” their options and that “this is not the final outcome of this case.”
The appeals panel ruled 2-1 that allowing the foundation’s “Fearless Go-getter Grant Contest” to award $20,000 in prize money “more than likely” violated federal laws banning racial discrimination in contracts, and ruled that the plaintiffs, who were not named in the complaint, had the right to move forward with their lawsuit.
The majority’s justices, Kevin Newsom and Robert Lack, were appointed by President Donald Trump. Dissenting Justice Robin Rosenbaum was appointed by President Barack Obama.
“The American Equal Rights Union is grateful that the court ruled that Fearless Fund’s race-specific grant competitions were unlawful,” Blum said in an emailed statement. “Our nation’s civil rights laws do not permit distinctions based on race, because some groups are over-represented in various activities while other groups are under-represented.”
The majority dismissed the foundation’s argument that the contests, which were open only to black women, were a form of expression protected by the First Amendment and therefore outside the scope of the Civil Rights Act of 1866, a Reconstruction-era law that bans discrimination in contracts. Newsom and Lack also rejected the foundation’s argument that the program was an effective program to correct racial imbalances in the venture capital world. They also rejected the foundation’s argument that the three plaintiffs did not have standing to be litigants because they were not named in the lawsuit.
The plaintiffs, all of whom are non-black female entrepreneurs, are identified as “Owner A,” “Owner B” and “Owner C.”
In his dissent, Rosenbaum focused on the issue of standing, likening the plaintiffs to “floppers” in football games — players who fake injuries to draw penalties from the opposing team. He argued that the plaintiffs have no real interest in the issues in the case and “are merely flappers on the field, as American Alliance has described its members’ injuries.”
But Newsom, who wrote the majority opinion, pushed back. “We are talking about living people who were denied the opportunity to compete in the Fearless Contest solely because of the color of their skin,” he wrote in the majority opinion. “With all due respect, victims of racism — whether white, black or brown — are not failures.”
