Key Takeaways
- • The 11th U.S. Circuit Court of Appeals blocked Fearless Fund's grant program for Black women-owned businesses in a 2-1 decision on September 30, 2023, halting applications due that same day and preventing the fund from distributing $20,000 grants to eligible applicants.
- • Edward Blum's American Alliance for Equal Rights—the organization behind the successful Supreme Court challenge to race-conscious college admissions—secured the temporary injunction, with the appeals court majority finding the program likely violated Section 1981 of the 1866 Civil Rights Act, which prohibits racial discrimination in contracting.
- • The decision reversed a lower court ruling by U.S. District Judge Thomas Thrash, who had denied the preliminary injunction on First Amendment free speech grounds, concluding Fearless Fund had a constitutional right to express support for Black women entrepreneurs through charitable giving.
- • Two Republican-appointed judges (Robert Luck and Andrew Brasher) comprised the majority, emphasizing that the First Amendment "does not give the defendants the right to exclude persons from a contractual regime based on race," distinguishing between protected speech and exclusionary contractual arrangements.
- • The ruling creates significant legal uncertainty for race- and gender-targeted investment and grant programs in venture capital and alternative asset management, with defense counsel indicating plans to pursue further appellate review.
Summary
A federal appeals court has temporarily blocked Atlanta-based Fearless Fund from distributing grants exclusively to businesses operated by Black women, ruling on September 30, 2023, that the program likely violates Civil Rights Act protections. The decision by the 11th U.S. Circuit Court of Appeals came via a 2-1 panel vote and immediately halted grant applications that were scheduled to close the same day. The fund had planned to award $20,000 grants to eligible applicants under the Fearless Strivers Grant Contest.
The challenge was brought by Edward Blum's American Alliance for Equal Rights, the same organization that successfully challenged affirmative action policies in college admissions before the U.S. Supreme Court earlier in 2023. Blum's group argued that Fearless Fund's race-based eligibility criteria constituted racial discrimination in contracting, invoking Section 1981 of the 1866 Civil Rights Act. The appeals court majority—Judges Robert Luck and Andrew Brasher, both appointed by former President Donald Trump—agreed with this interpretation, stating that the First Amendment does not protect contractual exclusions based on race.
This decision directly contradicted a lower court ruling issued three days earlier by U.S. District Judge Thomas Thrash, who had denied the same preliminary injunction request. Judge Thrash had held that Fearless Fund possessed a First Amendment right to express its values regarding the economic importance of Black women through charitable grant-giving, framing the program as protected speech rather than unlawful discrimination. The appeals court rejected this reasoning, drawing a distinction between expressive rights and contractual arrangements that exclude individuals based on protected characteristics.
The ruling represents a significant legal setback for race- and gender-targeted funding initiatives in venture capital and represents the expanding legal reach of anti-affirmative action litigation beyond higher education into private investment and philanthropic contexts. Defense counsel indicated plans to seek further appellate review, signaling that the case may proceed through additional levels of judicial scrutiny. For alternative asset managers and venture capital practitioners, the decision creates substantial uncertainty regarding the legality of similar targeted investment or grant programs designed to address representation gaps in entrepreneurship and capital access.
The challenge was brought by Edward Blum's American Alliance for Equal Rights, the same organization that successfully challenged affirmative action policies in college admissions before the U.S. Supreme Court earlier in 2023. Blum's group argued that Fearless Fund's race-based eligibility criteria constituted racial discrimination in contracting, invoking Section 1981 of the 1866 Civil Rights Act. The appeals court majority—Judges Robert Luck and Andrew Brasher, both appointed by former President Donald Trump—agreed with this interpretation, stating that the First Amendment does not protect contractual exclusions based on race.
This decision directly contradicted a lower court ruling issued three days earlier by U.S. District Judge Thomas Thrash, who had denied the same preliminary injunction request. Judge Thrash had held that Fearless Fund possessed a First Amendment right to express its values regarding the economic importance of Black women through charitable grant-giving, framing the program as protected speech rather than unlawful discrimination. The appeals court rejected this reasoning, drawing a distinction between expressive rights and contractual arrangements that exclude individuals based on protected characteristics.
The ruling represents a significant legal setback for race- and gender-targeted funding initiatives in venture capital and represents the expanding legal reach of anti-affirmative action litigation beyond higher education into private investment and philanthropic contexts. Defense counsel indicated plans to seek further appellate review, signaling that the case may proceed through additional levels of judicial scrutiny. For alternative asset managers and venture capital practitioners, the decision creates substantial uncertainty regarding the legality of similar targeted investment or grant programs designed to address representation gaps in entrepreneurship and capital access.
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