On January 29, 2024, Law360 published an article authored by LSSC's Kali J. Schellenberg and John S. Stapleton, with Kenneth I. Trujillo of Chamberlain Hrdlicka, analyzing American Alliance for Equal Rights v. Fearless Fund Management LLC—a challenge under Section 1981 of the Civil Rights Act to a grant program for Black women-led businesses. The case is scheduled for oral argument before the U.S. Court of Appeals for the Eleventh Circuit Court on January 31, 2024.

Fearless Fund was established by two Black women to address the gap in venture capital funding for women of color—who in 2022, received a mere .13% of such funding. Fearless’s philanthropic arm runs a grant contest that is open only to Black women-led businesses. The American Alliance for Equal Rights, founded by Edward Blum—the man behind the successful challenge to affirmative action in SFFA v. Harvard—challenges the grant program's compliance with Section 1981’s prohibition on racial discrimination in contracting.

The authors analyze the potential long-term impacts of the legal arguments raised in the case, focusing on the claim that Section 1981 does not apply to charitable giving. This argument posits that unlike commercial transactions and public accommodations, which are covered by Section 1981, charitable grants have never been seen as posing an obstacle to full participation in economic life or the right to participate in the marketplace. Both parties appear to agree, in principle, that charitable giving is exempt from Section 1981—but disagree over whether Fearless’s program is “charitable” in nature.

The article discusses the ramifications of a holding on this basis, while cautioning that organizations using race-conscious efforts to remediate racial disparities may face potential legal challenges, regardless of the ultimate decision in Fearless Fund.

You may read the article here.

LSSC is a business litigation boutique with a diverse and sophisticated practice and offices in Philadelphia and New Jersey.

Ms. Schellenberg previously was an honors attorney in the Civil Rights Division of the United States Department of Justice.