By Mike Scarcella
(Reuters) – Venture capital fund Fearless Fund cannot continue making grants to companies owned by black women, a divided U.S. appeals court ruled on Monday, siding with an anti-affirmative action group that sued over the program.
The Atlanta-based 11th U.S. Circuit Court of Appeals ruled that the group’s discrimination case was likely to succeed, reversing a judge’s decision that the program could continue while the case proceeds.
The ruling is a victory for Edward Blum, the conservative activist behind the U.S. Supreme Court’s successful challenge to race-conscious college admissions policies.
Blum’s group American Alliance for Equal Rights claimed last year that the Fearless Fund violated a 19th century federal law banning racial bias in private contracts.
The lawsuit targeted a Fearless Fund program that awards Black women who own small businesses $20,000 in grants and other resources to grow their businesses.
Companies owned by Black women in 2022 received less than 1% of the $288 billion deployed by venture capital firms, according to the Fearless Fund.
The 11th Circuit panel, led by Judge Kevin Newsom, an appointee of former Republican US President Donald Trump, concluded that the Fearless Fund program did not warrant speech protection under the First Amendment of the US Constitution.
Another Trump appointee, Robert Luck, joined Newsom’s order. Circuit Judge Robin Rosenbaum, an Obama-era appointee, disagreed, accusing prosecutors of pretending to be harmed by the program. The subsidy initiative had been suspended following an earlier decision by the court of appeal.
Lawyers for Fearless Fund said in a statement that Monday’s ruling contradicts more than 150 years of civil rights law. They said the decision “is not the final outcome in this case.”
Fearless Fund had argued in court in January that it had a constitutional right to express its belief in the importance of black women to the economy through charity.
Blum said in a statement Monday that federal “civil rights laws do not permit racial discrimination because some groups are overrepresented in various efforts, while others are underrepresented.”
