Lawsuit targets fund for Black, female entrepreneurs over discrimination – The Washington Post

“Laws must apply equally to every racial and ethnic group in the country,” Blum said in an interview with The Washington Post. If not, he said, they become “the request for one group’s idea of social justice.”

Blum’s lawsuits are “the beginnings of a very broad attack” on employers’ diversity efforts, said David Gans, director of the human rights, civil rights and citizenship program at the progressive Constitutional Accountability Center, a nonprofit law firm and think tank. “I think conservative litigators are going to be looking for ways to kind of extend the reasoning and rationale of the affirmative action cases into new contexts.”

Parsons, 43, leads the Board and CEO Inclusion practice at Korn Ferry and is a former corporate executive. Simone, 42, is a serial entrepreneur and angel investor, with a background in marketing and public relations. Despite their deep experience in business, they estimate they took 300 meetings with potential investors before getting their first $5 million in funding.

Now Fearless Fund is backed by Mastercard and Bank of America, and has invested in more than 40 businesses in the past four years, including popular brands like the Slutty Vegan restaurant chain and the Lip Bar makeup company. The firm has doled out more than $26 million in investments and $3 million in grants.

“We know women such as ourselves have been overlooked. We’ve been marginalized. We’ve been underfunded and unsupported,” Parsons said in an Aug. 10 news conference about the lawsuit. She noted that Black women are starting businesses at a higher rate than any other demographic, “yet they lack access to capital, access to resources, access to strategic networks and the education needed to scale their businesses.”

Blum, who has taken eight cases to the Supreme Court, describes himself as a matchmaker who brings together plaintiffs, lawyers and funders to advance the argument that any consideration of race or ethnicity is unconstitutional. He told The Post that he did not actively seek out the Fearless Fund case. Rather, he said, a woman-owned business emailed him describing the Fearless Fund. The lawsuit cites three female business owners, one from New York and two from Virginia, who argued that they could have benefited from the Fearless Fund grants but were ineligible because they are not Black. The lawsuit does not name the women, and Blum declined to identify them.

Blum said the fund’s grant program fails what he described as the “shoe-on-the-other-foot test.” Meaning: Would a fund aimed solely at benefiting businesses that are 51 percent owned by White males be considered fair and legal? It would not, Blum said, so a venture fund aimed at businesses owned primarily by Black women shouldn’t be, either.

That use of race to preclude a business from receiving money from the fund is a “compelling reason to look deeply at that particular policy,” Blum said. A legal team agreed that the case was actionable, he said, and that it could have wider public policy implications.

“It feels like he’s bullying them,” said Fatima Goss Graves, president and chief executive of the National Women’s Law Center, which is consulting on Fearless Fund’s legal team. And, she said, the Fearless Fund case is just the beginning. “I think he has a broader agenda and a broader plan to dismantle any effort by organizations to do work to provide equal opportunity in this country.”

The lawsuit claims that the venture capital firm’s practice of awarding $20,000 grants, business support services and mentorship to Black women-owned businesses violates a section of the Civil Rights Act of 1866 that guarantees “race neutrality” in contracts. That legislation, which was passed after the Civil War to protect the rights of people freed from enslavement, is also being used in similar lawsuits — along with the Civil Rights Act of 1964 — to claim that companies’ attempts to eradicate racial inequality qualify as discrimination.

Federal laws that were intended to ensure equal opportunity and rights for people of color “are now being used as a weapon to deny them rights,” said Kenneth Davis, professor of law and ethics at Fordham University. “It’s the height of irony.”

On Aug. 17, the Fearless Fund held a town hall with its portfolio companies, local representatives, legal counsel and other allies to discuss the lawsuit. About 400 people filled the brightly lit event room at the Gathering Spot, a private club and co-working space in Atlanta geared toward professionals from underrepresented backgrounds. Dressed in cocktail attire, attendees clinked glasses and snapped selfies with Crump and the Fearless Fund founders.

“We are being attacked, collectively,” Gathering Spot co-founder Ryan Wilson told the crowd of mostly Black investors and business owners. People nodded, offering a chorus of “mhmm’s.” “We’re in a fight, a real fight, with folks that are deeply organized. And they’ve got a lot of money,” Wilson said.

Emphatic support for Fearless Fund’s mission was on display throughout the event. When it came time for questions, attendees instead offered rallying cries, including Arlan Hamilton, founder of Backstage Capital. Hamilton, who built her VC fund while she was homeless, said the lawsuit against Fearless Fund landed “like a dagger to my heart.” She said she feels like her work, and that of others, is “being threatened.”

Now it’s up to the U.S. District Court for the Northern District of Georgia to decide whether Fearless Fund’s approach to closing that gap is acceptable or unconstitutional. In the coming months, Judge Thomas W. Thrash Jr., who was appointed by President Bill Clinton in 1997, is expected to decide whether Fearless Fund can continue issuing grants while the lawsuit unfolds.