Court blocks grants to Black women entrepreneurs since it could limit DEI efforts of corporations and charities

In a 2:1 vote on June 3, 2024, a panel of The US Court of Appeals for the eleventh Circuit ruled that the Fearless Foundation, the charitable arm of enterprise capital firm Fearless Fund, must suspend its Strivers Grant Contest. The competition is restricted to black women who’re majority owners of corporations.

The conversation asked Angela R. Logana scholar of non-profit management and variety, equality and inclusion policy, to elucidate the importance of this case, American Alliance for Equal Rights v. Fearless Fund Managementand what’s at stake.

What is the Fearless Fund?

Ayana Parsons And Arian Simonetwo experienced black entrepreneurs, founded the Fearless Fund in 2018 to supply financial and technical support to businesses run by other black women.

The Fearless Fund also runs a charity, the Fearless Foundation. Among other things, it runs the Strivers Scholarship Competitionwhich provides 4 winners with $20,000 and mentorship to assist them grow their businesses.

The Fearless Foundation received 332,000 USD turnover and had only $141,560 in net price in 2022, the newest yr for which this information is on the market. In other words, it is extremely small. Large US foundations have Foundation assets within the billions.

What is the American Alliance for Equal Rights?

The American Alliance for Equal Rights says it filed this lawsuit since it believes that denying non-blacks the chance to win a contract through a competitive process is a violation of their civil rights.

The group, led by former stockbroker and activist Edward Blum, is best known for using legal means to dam the promotion of minorities in higher education.

In June 2023, a majority of the Justice of the Supreme Court of the United States decided two cases brought by the Alliance on behalf of Asian-American students, which attend Harvard University and that University of North CarolinaThe court ruled that race-based college admissions were unconstitutional. Abolition of positive discrimination in admission to schools and universities.

Unlike of their education cases, not one of the plaintiffs Blum's group is representing on this latest case actually entered the Fearless Fund grant competition because they believed they might not receive funding. They are also anonymous.

The American Alliance for Equality reacted to the decision The organization expressed its “gratefulness” for the court's decision, adding: “Our country's civil rights laws do not allow for racial discrimination because some groups are overrepresented in various areas while others are underrepresented.”

What does the ruling say concerning the status of DEI efforts?

This case sets a very important precedent by alleging that the Fearless Foundation’s contest violated a federal law established under the Civil Rights Act of 1866: 42 USC Section 1981This law prohibits racial discrimination in contracts.

This law, which was passed immediately after the Civil War, was intended specifically to Emancipation of blacks from discrimination.

In my opinion, divided by leading philanthropic organizationsThe Alliance distorts the racial history of the United States through the use of this law as an argument that it’s unconstitutional, Black businesswomen overcome their lack of access to capital.

This litigation can also be problematic since it runs counter to the standard role that nonprofits play within the United States. By providing services that for-profit corporations and the federal government don’t, nonprofits bridge gaps. They have an extended and successful history of helping people on the margins of society: immigrant communities, individuals with various physical and mental abilities, and other people living in poverty.

And because this case could set the stage for larger, more aggressive actions to Efforts towards diversity, equality and inclusion in corporationsI consider that this ruling has dealt one other blow to attempts to make the country's economy and society fairer and more inclusive.

Why is that necessary?

It is amazingly difficult for Black women using startups to construct their businessesFor all black-led startups, financial support has steadily declined since its sharp rise in summer 2020.

Black and Latino women-owned businesses receive lower than 1% of all enterprise capital financing.

Not way back, it seemed as if this trend could be reversing.

Following the outrage over the murder of George Floyd by Minneapolis police officer Derek Chauvin in May 2020 the private sector and nonprofits alike sought to extend their donations and supply other varieties of support for Black people. Although the Fearless Fund was founded before Floyd’s murder, it too saw increasing interest and support – especially in 2021.

But with the waning of public attention and interest in justice for black Americans have these obligations.

This declining commitment coincided with the restriction and even outright prohibition of DEI efforts in some states at public colleges and universities, including Florida And TexasAt least seven other states have passed similar laws restricting DEI programs and racial justice-related instruction, and bills have been introduced proposed in one other 15 states.

This ruling could now make foundations wary of constructing contributions to nonprofit organizations that support women and other people of color for fear of being sued.

Where do you think that this case will lead?

I feel this case will ultimately go to the Supreme Court.

When that happens, I hope the judges recognize that opportunities for entrepreneurs of color remain limited. I consider they need to recognize the necessity for initiatives just like the Fearless Fund and its Strivers Grant Contest that aim to extend equal opportunities for Black women.