US appeals court blocks venture capital fund's grant program for Black women

© Reuters

By Nate Raymond

(Reuters) -A federal appeals court on Saturday blocked a venture capital fund from moving forward with a program that awards funding to businesses run by Black women in a case by the anti-affirmative action activist behind the successful U.S. Supreme Court challenge to race-conscious college admissions policies.

The Atlanta-based 11th U.S. Circuit Court of Appeals on a 2-1 vote granted a request by Edward Blum's American Alliance for Equal Rights to temporarily block Fearless Fund from considering applications for grants only from businesses led by Black women.

Blum's group asked the court to do so while it appealed a judge's Tuesday ruling denying it a preliminary injunction blocking Fearless Fund from moving forward with its "racially exclusive program." Grant applications were due Saturday.

The judges in the majority, U.S. Circuit Judges Robert Luck and Andrew Brasher, agreed with Blum's group that Fearless Fund's "racially exclusionary" grant program likely violated Section 1981 of the 1866 Civil Rights Act, a Civil War-era law that bars racial bias in contracting.

U.S. District Judge Thomas Thrash earlier this week concluded that under the U.S. Constitution's First Amendment's free speech protections, Fearless Fund had a right to express its belief in the importance of Black women to the economy through charity.

But the appeals court's majority, comprised of two appointees of Republican former President Donald Trump, said the First Amendment "does not give the defendants the right to exclude persons from a contractual regime based on race."

Blum in a statement said his group was "gratified that the 11th Circuit has recognized the likelihood that the Fearless Strivers Grant Contest is illegal." Defense lawyers said they planned to seek further appellate review.

"We remain committed to defending our clients’ meaningful work," said Jason Schwartz, a lawyer for Fearless Fund.

Fearless Fund describes itself as "built by women of color for women of color."

The lawsuit is one of three that Blum's Texas-based group has filed since August challenging grant and fellowship programs designed by the venture capital fund and two law firms to help give Black, Hispanic and other underrepresented minority groups greater career opportunities.

A different group founded by Blum, who is white, was behind the litigation that led to the June decision, powered by the Supreme Court's 6-3 conservative majority, declaring unlawful race-conscious student admissions policies used by Harvard University and the University of North Carolina.

According to the Fearless Fund, businesses owned by Black women in 2022 received less than 1% of the $288 billion that venture capital firms deployed.

The fund aims to address that disparity, and counts JPMorgan Chase (NYSE:JPM), Bank of America and MasterCard as investors. It has invested nearly $27 million in 40 businesses led by minority women since its founding in 2019.

It also provides grants, and Blum's lawsuit took aim at its Fearless Strivers Grant Contest, which awards Black women who own small businesses $20,000 in grants and other resources to grow their businesses.

The fund argued Blum was trying to "turn a seminal civil rights statute on its head" by suing it under a Civil War-era law enacted to protect formerly enslaved Black people from racial bias.

U.S. Circuit Judge Charles Wilson, an appointee of Democratic former President Bill Clinton, in a dissenting opinion on Saturday called it a "perversion" of Congress' intent to use that law against a remedial program like Fearless Fund's.