A federal judge in Atlanta has denied a conservative group's request for an injunction to stop a Black women-owned venture capitalist firm from awarding grants exclusively to Black women entrepreneurs.
The American Alliance for Equal Rights (AAER ) had argued that the Fearless Fund's grant program amounted to racial discrimination under the Civil Rights Act of 1866.
Judge Thomas Thrash, Jr., Senior U.S. District Judge of Northern District of Georgia, denied the group's request for a preliminary injunction to halt the firm's grant selection process while the lawsuit goes to trial, saying the case was a matter of free speech and charitable donations fall under the purview of the First Amendment.
"The judge's ruling today tells me that there are people in this world who respect progress and allow people to express their freedom of speech, and we are so grateful," Fearless Fund co-founder and CEO Arian Simone told CNN. "It's encouraging to know that laws are still in place to protect us."
AAER told CNN they are "disappointed" with the court's denial and have appealed the decision.
"Our nation's civil rights laws do not permit racial distinctions because some racial groups are overrepresented in various endeavors, while others are under-represented," said AAER founder Edward Blum in an email response to CNN.
Blum is the same conservative activist behind Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, the Supreme Court case whose June ruling dismantled affirmative action in college admissions.
Fearless Fund is an Atlanta-based company that was started in 2019 to break down the barriers Black women face trying to secure resources and funding for growing their business. Their website lists corporate giants including Bank of America, JPMorgan Chase, Fifth Third Bank and Mastercard as partners. Fearless Fund runs a separate non-profit organization called the Fearless Foundation, where it gives charitable donations and grants to women of color entrepreneurs, according to co-founder and COO Ayana Parsons.
Simone said the venture capitalist firm is the first of its kind "built by women of color, for women of color."
"Women of color are the least funded but the most founded," said Simone, adding that Black women statistically make up the majority of small business owners, but receive the least amount of funding compared to other demographics.
It was one of Fearless Foundation's grants, the Strivers Grant Contest, which exclusively awards Black women entrepreneurs up to $20,000, that was the target of AAER's complaint.
In early August, Blum filed a lawsuit on behalf of AAER against the Fearless Fund and its foundation. The group argued that their members, un-named in the lawsuit, were excluded from the program because they weren't Black, and faced "additional harm" from the illegal act of racial discrimination, AAER's attorneys stated in the court hearing.
Blum told CNN that "venture capital funding gaps between the races is never a legal or moral justification to exclude certain men and women from public programs by race or ethnicity."
He added that AAER "believes it is legally permissible to provide benefits to businesses and individuals who are under-resourced but those benefits must be made available to all races and ethnicities."
During closing remarks, Judge Thrash said his understanding was that the Fearless Fund is trying to get a message across that Black women lack access to capital funds, a problem they recognize and are trying to address.
"The Plaintiff wants them to communicate a different message," Thrash said. "That's not the way it works."
AAER's attorneys declined to comment after the hearing.
The lawsuit caught the attention of civil rights activist and leader Rev. Al Sharpton, who said he views it as evidence the fight over affirmative action is expanding beyond school grounds. In a news release on Monday, Rev. Sharpton said that the case could have larger consequences for DEI initiatives across corporate America and could pave the way for future lawsuits "targeting race-conscious diversity programs ... across all kinds of public and private sectors."
In the month after the Supreme Court's landmark affirmative action decision, conservatives put top Fortune 100 companies on notice. Thirteen Republican state attorneys general sent a letter to top companies including Apple, Google, Netflix and others, arguing the court's ruling on affirmative action also applied to employers.
"[We] write to remind you of your obligations as an employer under federal and state law to refrain from discriminating on the basis of race, whether under the label of 'diversity, equity, and inclusion' or otherwise," the letter read. "Treating people differently because of the color of their skin, even for benign purposes, is unlawful and wrong. Companies that engage in racial discrimination should and will face serious legal consequences."
Outside the federal courthouse after the judge denied AAER's motion, Sharpton stood with Simone and Parsons, the Fearless Fund co-founders.
"We won the first round but the fight is not over ... we're going to keep on fighting, and we're going to fight wherever this reactionary group raises his [sic] head," he told the crowd of supporters and media gathered.
Parsons told CNN that she believes the lawsuit is bigger than the Fearless Fund, venture capital or corporate America.
"I've been a corporate executive my entire career, and yes diversity, equity and inclusion is under attack," she said. "I hope that the American people understand the magnitude of this lawsuit and how it impacts and affects all of us."
She said Fearless Fund is not afraid of what comes next in the legal process, but emphasized her belief that this is an attempt to dismantle the economic freedom and progress being made in the country.
"This is about anything that is race-conscious decision making and trying to include those that have long been excluded," Parsons said.
As a Black business owner, Sophia Danner-Okotie said she couldn't get a loan despite showing proof of growth and contract opportunities she had lined up with retailers.
"We're definitely under-funded and it's felt -- it's felt hard," she told CNN. Danner-Okotie said she has received a $10,000 grant from the Fearless Foundation."Not being able to go to a bank and get funding - that kills your courage sometimes, that kills your ambition," she said. "So Fearless Foundation stepping in and saying, 'We're going to help you with this mission. We believe in what you're doing, and we want to help you grow this business.' That was a boost to my business and ego as well."
This is not the end of the line for AAER's lawsuit. While Judge Thrash denied a preliminary injunction to pause the grant program, the case itself continues in the Northern District.