Fearless Fund, based in Atlanta, said that it would comply with the injunction but was certain that it would win the lawsuit.
The 2-1 verdict by the 11th U.S. Circuit Court of Appeals prevents the Fearless Fund from sponsoring the Strivers Grant Contest, which awards $20,000 to businesses owned at least 51% by Black women, among other limitations.
Fearless Fund, located in Atlanta, said in a statement Sunday that it will comply with the verdict but remained confident about winning the lawsuit.
The complaint was launched by the American Alliance for Equal Rights, headed by conservative activist Edward Blum, alleging that the fund violates a provision of the Civil Rights Act of 1866 that prohibits racial discrimination in contracts.
“We strongly disagree with the decision and remain resolute in our mission and commitment to address the unacceptable disparities that exist for Black women and other women of color in the venture capital space,” said the Fearless Fund.
The order, released on Saturday, reversed a ruling issued on Tuesday by U.S. District Judge Thomas W. Thrash, who denied the American Alliance’s request to stop the program.
The majority of the three-judge panel concluded that the Fearless Fund’s program is “racially exclusionary” and that Blum’s group is likely to prevail.
“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,” Blum said in a news statement. “We look forward to the final resolution of this lawsuit.”
In his dissent, Judge Charles R. Wilson claimed that applying the 1866 act to the Fearless Fund’s program was a “perversion of Congressional intent,” considering that the Reconstruction-era legislation was supposed to protect Black people from economic marginalization. Wilson expected that the lawsuit will be dismissed.
In the backdrop of the United States Supreme Court’s decision in June to restrict affirmative action in college admissions, the topic has become a test case as the debate over racial considerations extends to the workplace.
The grant competition is one of many programs sponsored by the Fearless Fund, which was established to bridge the funding gap for Black female entrepreneurs, who get less than 1% of venture capital investment.
To be eligible for the honors, a company must be owned at least 51% by a Black woman, among other qualifications.
To oppose the lawsuit, the Fearless Fund has engaged famous civil rights lawyers, including Ben Crump. According to the attorneys, the grants are not contracts, but rather donations protected by the First Amendment.
The appeals court disagreed, writing in a majority decision that the First Amendment “does not give defendants the right to exclude persons from a contractual regime based on their race.”