The settlement of a case last week that would have tested whether charities can make grants based on race — and perhaps put the decision before the Supreme Court — has left the issue in a legal gray zone.
In the settlement, the American Alliance for Equal Rights, a litigation nonprofit run by conservative activist Edward Blum, agreed to drop its suit — and the Fearless Fund, an Atlanta venture fund that has an associated foundation, agreed to discontinue a grant program that gave money exclusively to Black woman entrepreneurs.
The Fearless Fund said in social media posts that it will redouble its efforts to support “under-resourced entrepreneurs.” In settling, the fund said it avoided an adverse ruling in the conservative-leaning 11th Circuit Court of Appeals, where the case was being heard, and stalled a possible Supreme Court hearing that would have tested the reach of last summer’s college admissions affirmative action reversal. In that decision, the high court ruled that Harvard University’s and the University of North Carolina’s admissions policies violated the equal-protection clause of the 14th Amendment.
At issue in American Alliance for Equal Rights v. Fearless Fund was whether a philanthropic grant should be construed as a gift or a contract. If a grant is considered a contract — and intended exclusively to benefit members of a single race — it could violate a civil rights law passed during the Reconstruction era to protect Black people from discrimination.
Following the Supreme Court’s affirmative action decision, the American Alliance for Equal Rights argued that the Fearless Fund grant was a contract that ran afoul of the law. Law firms, nonprofits, and the Smithsonian have also been targets of similar lawsuits since the Supreme Court decision. Progressive proponents of race-based grants, including the Council on Foundation and Independent Sector — networks that include grant makers and nonprofits — argued that such grants are safeguarded by the U.S. Constitution’s protections for freedom of expression.
No Consensus
As affirmative action lawsuits proliferate across the country, some grant makers said they would continue making grants that specify grantees based on race.
“We’re going to stick with it,” said Toya Fick, president of the Meyer Memorial Trust in Oregon. “We’re not dampening or changing our language about what we’re aiming to do, who we are, and who we serve.”
Joanna Jackson, president of the Weingart Foundation in California, is of a similar mind. Weingart is not “directive” in how grantees use its money because it largely gives unrestricted grants. That approach may reduce the foundation’s exposure to affirmative action opponents.
Still, Jackson said, “there’s nothing against the law about having a mission that is advancing racial justice.”
Legal experts offered varying interpretations of the settlement’s implications.
By coming to terms on the case, the Fearless Fund avoided a final judgment and the creation of a legal precedent, said Scott Curran, a legal consultant to foundations and the former general counsel at the Clinton Foundation.
“The settlement takes it out of the courts and relieves everyone of a judicial disposition of the case,” he said.
Skylar Croy, a lawyer at the Wisconsin Institute for Law & Liberty, a conservative legal nonprofit, sees it differently. Before the settlement in July, the 11th Circuit Court reversed a lower court ruling that had allowed the Fearless Fund to continue its grant program. In granting a preliminary injunction against the fund, the appeals court signaled its belief that Blum’s group would likely prevail on the merits of its case.
The settlement is a “an undeniable win” for opponents of affirmative action, Croy said, adding that while no final judgment was reached, the preliminary injunction would be cited as precedent outside of the 11th Circuit.
Croy said the institute is preparing lawsuits related to privately funded scholarships for students of color. The Fearless Fund’s grant language was clearly a contract, he said, but a lot of future cases will likely be “closer calls” that delve into the language used in agreements between donors and grantees.
The action in the 11th Circuit was unique to the Fearless Fund and shouldn’t restrict race-based grant-making practices across the country, said E. Bomani Johnson, senior director of special initiatives at ABFE, a network formerly known as the Association of Black Foundation Executives.
Johnson worried that the Fearless Fund settlement, and the probability of other similar legal attacks, would cause foundations fearing exposure to lawsuits to backtrack on commitments to support racial justice.
“We’re being bombarded by narratives that say this work is wrong or illegal,” he said. “Philanthropy has to move more in step with their grantee partners instead of sitting back in their roles as funders worried about their reputational risk.”
Two New Legal Funds
Over the past year ABFE, has joined with other grant-making networks — Asian American/Pacific Islanders in Philanthropy, Hispanics in Philanthropy, and Native Americans in Philanthropy — to create the Racial Equity Advancement and Defense Initiative. The goal is to help nonprofits effectively advocate for legal support grants from foundations and to provide them with a repository of legal research, news, and opinion on affirmative action cases nationally. Through a partnership with the Lawyers’ Committee for Civil Rights Under Law, the networks also provide pro bono legal advice to nonprofits and foundations that fear lawsuits.
The groups plan to introduce a fund within the next month or so, with a goal of raising $3 million to support legal representation for charities targeted for making race-based grants. Johnson declined to say how close the group is to reaching that goal.
In a similar move, Marc Philpart, president of the California Black Freedom Fund, in May announced the creation of the Legal Education for Advocacy and Defense (LEAD) for Racial Justice Initiative. The effort has arranged for pro bono legal advice for more than 150 organizations, Philpart said.
Philpart is also working on raising money for a legal defense fund but declined to say how much has been raised.
When he took on the job leading the California Black Freedom Fund in 2022, Philpart said he expected to be busy supporting community organizers and defending civil rights. But he did not anticipate the “onslaught of legal attacks” that followed the affirmative action decision.
Now the broad push-back against diversity, equity, and inclusion and the push for equality have given him even more pause.
Said Philpart: “Even more surprising than the legal attacks is the dissipation of public will and support and the reluctance of funders and the public sector to double down on their racial justice commitments.”
