Fearless Fund Ruling: What Does it Mean?
You have probably heard about the recent ruling regarding the Fearless Fund, and quick reactions by many that this could end DEI practices, philanthropy targeting underserved communities, and much more.
The intention of this newsletter is to tell you the basics of the ruling, what it may mean for nonprofits and philanthropies, and what it does NOT mean for them.
In a recent ruling, the U.S. Court of Appeals for the 11th Circuit issued a preliminary injunction against the Fearless Fund's Strivers Grant Contest, a program designed to support Black women-owned businesses. This decision may have significant implications for philanthropic initiatives, particularly those focused on racial equity.
Please note, I am not a legal expert. I have just gathered information from various articles as they are emerging to try and provide some of the salient details and start a real discussion.
The Ruling: What It Is About
The case, American Alliance for Equal Rights v. Fearless Fund Management, LLC, centers on the Fearless Fund's grant program, which provides $20,000 grants and mentorship opportunities to Black women-owned businesses. The 11th Circuit ruled that this program likely violates Section 1981 of the Civil Rights Act, which prohibits racial discrimination in contracts. The court determined that the grant program constitutes a "contract" because it involves a bargained-for exchange where grantees provide promotional rights and indemnity to the Fearless Fund in return for the grant and mentorship.
What the Ruling Does NOT Mean
Not a Final Decision: The ruling is a preliminary injunction, not a final judgment on the merits of the case. The legal battle is ongoing, and the final outcome remains uncertain.
Not a Blanket Ban: The decision does not immediately invalidate all race-conscious philanthropic initiatives. It is specific to the context of the Fearless Fund's grant program.
Limited Scope: The ruling applies to the jurisdiction of the 11th Circuit, which includes Alabama, Florida, and Georgia. Other jurisdictions may interpret similar cases differently.
What the Ruling Does Mean: Practical Implications
Increased Scrutiny: Philanthropic organizations may face increased legal scrutiny over race-specific grant programs. Foundations might need to review and possibly revise their grant agreements to ensure they do not create contractual relationships subject to Section 1981.
Reconsideration of DEI Initiatives: Nonprofits and foundations may need to reconsider their Diversity, Equity, and Inclusion (DEI) initiatives. This could involve broadening eligibility criteria to avoid explicit race requirements while still targeting underserved communities.
The Fear Effect: The ruling could have a chilling effect on targeted support for underrepresented groups, as organizations might fear legal challenges.
Alternative Approaches: Organizations may explore race-neutral alternatives that still address disparities, such as focusing on socio-economic status or geographic location.
Practical Considerations for Nonprofits and Foundations
Review and Revise: Nonprofits should review their existing grant programs and DEI initiatives to ensure compliance with current legal standards. Consulting legal counsel is advisable.
Broaden Criteria: Consider broadening eligibility criteria to include a wider range of applicants while maintaining a focus on underserved communities.
Monitor Litigation: Stay informed about ongoing litigation and potential circuit splits that could lead to a Supreme Court review. This will help organizations adapt their strategies accordingly.
Looking Ahead
The 11th Circuit's ruling is part of a broader trend of legal challenges to race-conscious programs. The outcome of this and similar cases could significantly impact the future of philanthropic initiatives aimed at promoting racial equity. Nonprofits and foundations must stay vigilant and adaptable as the legal landscape evolves.
I sincerely hope this serves as a good starting place for those of your who may have heard about the ruling, but didn’t know the details. Please feel free to provide any thoughts, comments, or corrections.
Some Articles on this Ruling
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