Federal appeals court strikes down black-only venture capital contest

 June 4, 2024

A federal appeals court has struck down a venture capital program that is open only to black business owners, finding it likely violates civil rights law. 

The Fearless Fund was ordered to halt one of its grant programs, which awards $20,000 apiece to four black female business owners. Edward Blum, an activist and founder of the American Alliance for Equal Rights, sued the Fearless Fund for discrimination.

The 11th Circuit Appeals Court found that the Fearless Fund likely violated the 1866 Civil Rights Act, which bars racial discrimination in private contracts.

Appeals court ruling

The ruling was slammed by Fearless Fund CEO and Founder Arian Simone as a loss for "diversity" in the corporate world.

“The message these judges sent today is that diversity in Corporate America, education, or anywhere else should not exist,” she said in statement. “These judges bought what a small group of white men were selling.”

The contest is open only to "black females who are . . . legal U.S. residents" and businesses that are at least 51% owned by black women.

The Fearless Fund raised a number of arguments, which were all rejected. The group claimed that anonymous business owners A, B, and C had not suffered a concrete injury and therefore lacked standing to sue.

Judge Robin Rosenbaum, an Obama appointee, agreed, comparing the challengers to athletes who "flop" on the field.

The majority found, however, that the plaintiffs were "ready and able" to enter the contest had they not been barred on the basis of race.

Arguments denied

The Fearless Fund also argued the contest is not a contract. The original contest rules state, "BY ENTERING THIS CONTEST, YOU AGREE TO THESE OFFICIAL RULES, WHICH ARE A CONTRACT.”

The Fearless Fund later scrubbed the rules of references to a contract after American Alliance for Equal Rights sued - but the court found that the contest remained, substantially, a contract.

Finally, the Appeals Court rejected the Fearless Fund's argument that its contest is "expressive conduct" shielded by the First Amendment.

Setback for DEI agenda

The court entered a preliminary injunction, finding that the anonymous plaintiffs had suffered "irreparable injury."

"Each lost opportunity to enter Fearless’s contest works an irreparable injury because it prevents the Alliance’s members from competing at all—not just for the $20,000 cash prize but also for Fearless’s ongoing mentorship and the ensuing business opportunities that a contest victory might provide."

Edward Blum hailed the ruling as a victory for equality under the law.

"Civil rights laws do not permit racial distinctions because some groups are overrepresented in various endeavors, while others are under-represented," he said.

" A free people [claim] their rights, as derived from the laws of nature."
Thomas Jefferson
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