Diversity Efforts Get Taken to Court

Social justice movements tend to happen organically. A breaking point is reached, and suddenly the fight for women's suffrage reaches a critical momentum that cannot be slowed. An incident such as George Floyd's death becomes a turning point in a movement that already existed. These social justice movements gained strength naturally over years of struggle. But once the movements hit a certain point, their need for resources increases. And that is where philanthropy steps in. As stated by Carmen Rojas in the Stanford Social Innovation Review, the role of philanthropy "is ultimately to fund, not to fight." Spreading the word, organizing volunteers, and putting plans into action all take money. Philanthropy is there to support these organic movements, to provide the resources to help them see their effort through to what is, hopefully, a positive conclusion.

But two recent lawsuits are challenging the ability of certain organizations to fund that fight to create social justice. In both cases, programs to fund minority entrepreneurs have been taken to court, citing that they are unfair to people who are not minorities.

In early October, the 11th U.S. Circuit Court of Appeals in Atlanta made a ruling to temporarily block Fearless Fund from running their Strivers Grant Contest, which offers grants to small businesses led by women of color. According to NPR, "The American Alliance for Equal Rights filed a racial discrimination lawsuit against the program in August, claiming it violates the Reconstruction-era Civil Rights Act of 1866, which prohibits racial discrimination in contracts."

Fearless Fund, which has a mission to bridge the gap in venture capital funding for women-of-color founders, argued that there is a difference between grants and contracts, with grants being considered awards and therefore protected by the First Amendment to the U.S. Constitution. (The Nonprofit Law Blog explains the difference between grants and contracts outside of the context of the lawsuit.)

Despite the impression most folks might get from its name alone, the American Alliance for Equal Rights isn't an organization designed to fight for minority rights. The Alliance has filed multiple lawsuits challenging programs seeking to advance diversity. For example, they have sued two law firms, Perkins Coie LLP and Morrison & Forester LLP, for the law firms' fellowship programs that seek to advance diversity in the law profession. The Lawyers’ Committee for Civil Rights Under Law, which filed an amicus brief in the Fearless Fund lawsuit, has described the Alliance as "one of multiple craftily-named entities founded by ultra-conservative, anti-civil rights crusader Edward Blum." Blum has also been a key figure in the fight against affirmative action in higher education.

A similar lawsuit has also been filed against Hello Alice, an organization that supports a range of small businesses and entrepreneurs. Some of Hello Alice's programs are open to all small businesses, while others have more targeted criteria. One specific program, in partnership with Progressive, an insurance company, offered support to Black entrepreneurs to use toward the purchase of a commercial vehicle for their business. In this case, an organization named America First Legal (AFL) filed the lawsuit on behalf of a White trucker, Nathan Roberts, whose company is insured through Progressive. Roberts was unable to acquire funding through the program. Again, the lawsuit is based on whether grants can be considered contracts.

AFL was founded by Stephen Miller, a former senior advisor to President Donald Trump. Miller is perhaps best known as one of the main architects behind the Trump administration's family separation border policy. The cases filed by AFL include one against NYU Law Review and one against Target. In a statement about the Target filing, AFL claimed that "Target embraced the radical transgender agenda with its children-and-family-themed 'Pride' marketing and sales campaign" and therefore hurt the company's shareholders.

Statistically, there seems to be a need for the types of programs offered by Fearless Fund and Hello Alice. The U.S. population is 13.6% Black or African American, but "less than 1% of all venture capital goes to Black women and less than 2% goes to Black founders overall." In the case of the law firm fellowships, Black associates number between 4.5% and 5.77% of all law firm associates. In business and law, it's obvious that Black Americans are extremely underrepresented.

These programs are trying to help eliminate demonstrable inequities in their fields. If the rulings stand, they could have a profound effect on the grantmaking sector's ability to address similar inequities in communities and in society as a whole. These inequities will not self-correct any time soon, and shutting down efforts to address the inequities will further entrench the status quo. While the lawsuits claim that they want the ability for everyone to apply, when programs are not designed to address societal imbalances, the results are often far from equitable. One venture capital executive stated, "The statistics in our work are just awful. Black entrepreneurs have less access to capital and are rejected at a three times higher rate" than their White peers. Such lawsuits will contribute to preventing any correction to that gap.

And while the statute at issue in the two aforementioned lawsuits, the Civil Rights Act of 1866, specifically mentions race, the lawsuits could open the door to similar legal actions targeting other classes. Following the Supreme Court's ruling on race-based affirmative action in college admissions, some folks have wondered if gender-based policies could be next. One can imagine a future where the means of targeting needy groups have been severely curtailed, and philanthropic organizations channel the motto of George Constanza's Human Fund, offering some vague and broad promise of "money for people."

The movement for social justice is far from over. But if these rulings withstand all appeals, social justice nonprofits will have to figure out new ways to operate in a system that won't recognize, and therefore won't let them address, these inequities. If it comes to that, we must hope that the sector as a whole is up for such a challenge.