The 11th Circuit Court of Appeals in Atlanta on Saturday ordered Atlanta-based venture capital firm Fearless Fund to pause grant applications supporting Black female founders while a lawsuit alleging racial discrimination works its way through the court.
The ruling is the first legal win for the nonprofit American Alliance for Equal Rights, a conservative group started by Edward Blum, a key activist in the successful challenge of affirmative action in college admissions. The Alliance sued Fearless in early August, alleging their $20,000 small business grant program was racially discriminatory because it was only for Black women.
The grant application was supposed to close on Saturday, Sept. 30, but must now remain open until further order of the court. No grant winner can be decided yet.
On Tuesday, the Alliance and Fearless met in federal court for the first time, where lawyers for the Alliance asked U.S. District Court Judge Thomas Thrash Jr. to bar Fearless from enforcing the racial eligibility criteria for the grants. But Thrash denied the motion, saying the program sends a message that Fearless wants to support Black women business-owners and that message is protected free speech. In his written opinion, Thrash said the Alliance “failed to carry its burden to clearly show a likelihood of success on the merits and irreparable harm.”
Later Tuesday, the Alliance filed an emergency motion with the 11th Circuit and a three-judge panel overturned Thrash’s ruling. Two judges sided with the Alliance, saying “the plaintiffs have established an irreparable injury,” calling the grant program “racially exclusionary.” One judge dissented, siding with Fearless.
“We respectfully disagree with this court’s decision, appreciate the important points raised by the dissent, and look forward to further appellate review. We remain committed to defending the meaningful work of our clients,” Alphonso David, president and CEO of the Global Black Economic Forum and one of the lead lawyers for Fearless, said in a statement.
Similar conservative organizations have also targeted major corporations like McDonald’s, Target and Progressive, moves that are widely seen as an attack on affirmative action programs in business.
But some venture capitalists who invest in Black founders are now doubling down on their work. Jewel Burks Solomon is a co-founder and managing partner at Collab Capital, an Atlanta-based VC firm that invests solely in Black-led companies. This week at the Intentionally Good Summit, a gathering for diverse founders that was held inside of the Venture Atlanta conference, Burks Solomon was defiant when talking about the recent spate of lawsuits.
“It would not be true to why we started [Collab], why we got in this business, if we made any tweaks or adjustments out of fear,” Burks Solomon said during a panel discussion. “The mission has to stay the same and how we communicate around it, how we collaborate around it should also stay consistent.”
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