Fearless Fund Case Summary
On August 2, 2023, the nonprofit membership organization American Alliance for Equal Rights (AAER) filed a complaint on behalf of three of its unnamed members in the Northern District of Georgia against Fearless Fund and related entities—including Fearless Foundation, a 501(c)(3) organization. The lawsuit alleged that a grant program run by Fearless Foundation violates 42 U.S.C. Section 1981, a federal statute enacted as part of the Civil Rights Act of 1866 that prohibits discrimination on the basis of race in the making or enforcement of contracts. While the statute gives all persons the same right as is enjoyed by white citizens and was intended to provide legal protections for Black people who were facing widespread discrimination in the wake of emancipation, it has since been interpreted by the courts as protecting people of all races from discrimination in contract formation or enforcement.
At issue in this case is the Fearless Strivers grant contest, which awards grants of up to $20,000 to Black women-owned small businesses. According to the official rules listed on Fearless Fund’s website, the grants are to be distributed by Fearless Foundation and eligibility is limited to businesses that are majority owned by Black women. AAER alleges that the grant program constitutes a contractual relationship between Fearless Foundation and grant applicants and that the restriction of eligibility to businesses owned by Black women violates Section 1981.
In December, the Council and Independent Sector filed an amicus brief in the case, calling on the court to dismiss this lawsuit and rule in line with the First Amendment that philanthropies and individuals have a constitutional right to donate to charitable causes that align with their values, including efforts to support historically marginalized groups.
On January 31, 2024, the two sides presented arguments to a three-judge appeals panel in Miami after lawyers for Fearless asked for an expedited hearing. At issue were two major questions: whether the Fearless Strivers grant contest constitutes expressive conduct protected under the First Amendment, and whether AAER has legal standing to sue Fearless Fund/Fearless Foundation.
On the First Amendment issue, the judges’ questions primarily focused on determining whether and to what extent the grant contest should be distinguished from pure commercial activity and whether the fact that there was a contest involved should result in the grant program being treated differently than a gift made with no strings attached.
On the issue of standing, the judges considered whether AAER’s complaint needed to identify the three anonymous business owners it is representing by their legal names and whether the complaint’s statement that these business owners were “able and ready” to apply for a grant was sufficient to establish that any of them would have taken steps to apply if not for the racial limitation on eligibility.
On June 3, 2024, the 11th Circuit appeals court ruled that AAER does have standing to sue, and upheld the injunction in the case.
After being remanded back to the District court, the parties subsequently agreed to settle the case on September 11, 2024. Under that settlement, Fearless will permanently close the existing grant program.
Timeline of the Case
- August 2, 2023: American Alliance for Equal Rights (AAER) files lawsuit against Fearless Fund and Fearless Foundation (full lawsuit).
- September 26, 2023: U.S. District Judge Thomas W. Thrash denies request by AAER to halt the grant awards process, saying that the grant program qualifies as charitable giving, a form of protected speech under the First Amendment.
- September 30, 2023: A three-person panel on the U.S. Court of Appeals for the 11th Circuit blocks the grant program, saying the program was “racially exclusionary” and “substantially likely” to violate a federal law prohibiting racial discrimination in contracting. The decision reverses the September 26 ruling.
- December 6, 2023: Fearless Fund/Foundation files a brief with the U.S. Court of Appeals for the 11th Circuit, asking the court to uphold the September 26 ruling and reinstate the grant program.
- December 12, 2023: Council on Foundations/Independent Sector file amicus brief.
- January 31, 2024: Fearless Fund/Foundation and AAER present arguments to a three-judge appeals panel in Miami after lawyers for Fearless asked for an expedited hearing.
- June 3, 2024: The 11th Circuit released a ruling that upheld the injunction in the case.
- September 11, 2024: The parties have settled the case, with Fearless Foundation agreeing to permanently close the grant program.
