Conservative activist uses Civil War-era law to challenge US corporate diversity

[September 26, 2023]  By Nate Raymond

(Reuters) - The anti-affirmative action activist behind the successful U.S. Supreme Court challenge to race-conscious college admissions policies is trying to use a Civil War-era law designed to protect formerly enslaved Black people from racial bias to dismantle American corporate diversity programs.

In a trio of lawsuits filed since August, Edward Blum's American Alliance for Equal Rights organization has challenged grant and fellowship programs designed by a venture capital fund and two law firms to help give Black, Hispanic and other underrepresented minority groups greater career opportunities.

Those lawsuits accuse all three of violating Section 1981 of the 1866 Civil Rights Act, a law enacted after the Civil War that guarantees all people the same right to make and enforce contracts "as is enjoyed by white citizens."

While the law was adopted with formerly enslaved Black people in mind, courts have interpreted it for decades as protecting white people from racial discrimination as well. Blum's group relies upon those rulings in seeking a corporate sequel to the June decision, powered by the Supreme Court's 6-3 conservative majority, in favor of another group he founded declaring race-conscious student admissions policies used by Harvard University and the University of North Carolina unlawful.

His strategy faces its first major test on Tuesday, when U.S. District Judge Thomas Thrash in Atlanta hears arguments in Blum's lawsuit challenging venture capital firm Fearless Fund's grant program designed to promote businesses owned by Black women.

With a Saturday deadline approaching for this year's grant applications, Blum's group is asking Thrash, an appointee of Democratic former President Bill Clinton, to quickly issue a preliminary injunction barring Fearless Fund from using race-based criteria for the grant program.

"All of our nation's civil rights laws - including the 1866 Civil Rights Act - enshrine the command that someone's race and ethnicity must never be used to help or harm them in public and private employment and contracting," Blum, who is white, told Reuters in an email.

Sarah Hinger, a lawyer at the American Civil Liberties Union's Racial Justice Program, said Blum's lawsuits pose a threat to efforts to remove barriers to opportunity for people of all races in private sector jobs.

"This is an effort to scare similar employers and investors away from what is in some ways a nascent effort to address inequities," Hinger added.

Atlanta-based Fearless Fund is a small player in the $288 billion venture capital market. It was launched in 2019 by three prominent Black women - actress Keshia Knight Pulliam, entrepreneur Arian Simone and corporate executive Ayana Parsons - and has invested nearly $27 million in businesses led by minority women.

Anti-affirmative action activist Edward Blum, founder of Students for Fair Admissions (SFFA), speaks to reporters at the "Rally for the American Dream-Equal Education Rights for All," ahead of the start of the trial in a lawsuit accusing Harvard University of discriminating against Asian-American applicants, in Boston, Massachusetts, U.S., October 14, 2018. REUTERS/Brian Snyder/File Photo

It also provides grants to businesses owned by Black women - a category that in 2022 received less than 1% of all venture capital funding, according to the advocacy group digitalundivided.

The lawsuit by Blum's Texas-based group takes aim at the fund's Fearless Strivers Grant Contest, which awards Black women who own small businesses $20,000 in grants and other resources to grow their businesses. The lawsuit alleges that the program's criteria illegally excludes applicants who are white, Asian or other races.

FREE SPEECH ARGUMENT

Fearless Fund has brought in prominent lawyers to defend it, including civil rights attorneys Ben Crump and Alphonso David, who during a news conference called Blum's use of the Civil War-era law "cynical."

The fund's attorneys in court papers have said Blum wants to "distort the purpose and text of this seminal civil rights statute to use it against Black people" to dismantle this grant program. They argue that the rules for the grants are merely criteria for being eligible for a "discretionary gift" and do not create a "contract" subject to the civil rights law.

Because charitable giving is a form of free speech under the U.S. Constitution's First Amendment, Fearless Fund's lawyers have said it cannot be forced to use race-neutral criteria for a grant program designed to further its belief that "Black women-owned businesses are vital to our economy."

They have cited another June Supreme Court ruling holding that an evangelical Christian website designer from Colorado had a First Amendment right to refuse to create websites for same-sex marriages to support the fund's argument that it can consider race in deciding how to express itself through charity.

Blum's group countered that Fearless Fund's argument would ironically undermine the very causes it favors by essentially invalidating Section 1981 and deeming racial discrimination protected by the First Amendment.

His lawsuits appear already to be seeing results. Another Blum target, law firm Morrison & Foerster, has appeared to buckle by removing language specifying that a diversity fellowship for law students was open only to Black, Hispanic, Native American or LGBT applicants. Morrison & Foerster did not immediately respond to a request for comment.

(Reporting by Nate Raymond in Boston, Editing by Alexia Garamfalvi and Will Dunham)

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