The US Court of Appeals for the 11th Circuit has temporarily enjoined a venture capital fund’s contest that awards Black women-run businesses according to an appeal from the US District Court for the Northern District of Georgia Atlanta Division. The plaintiff, American Alliance for Equal Rights (AAER), argued that the Fearless Strivers Grant Contest, facilitated by the aforementioned fund, violates
§ 1981 of the Civil Rights Act of 1866. The court agreed, and consequently prevented the contest’s application window from closing or selecting any winners.
The 11th Circuit found that AAER demonstrated a likelihood of success on the merits of its claim. The law being invoked, § 1981, is noted for its broad terms, serving to outlaw discrimination against or in favor of any race in the making or enforcement of contracts.
However, Circuit Judge Charles R. Wilson disagreed with this interpretation. He claimed that AAER’s claim failed as it brought a § 1981 claim on behalf of white members. Judge Wilson argued it was a distortion of Congressional intent to use § 1981 against a program meant to bridge the gap in venture capitalist funding for women of color founders, a gap that was created by centuries of intentional racial discrimination.
The lawsuit began when AAER sued several venture capitalist defendants over the contest and sought an injunction to halt the contest. District Judge Thomas W. Thrash Jr., in his opinion and order, noted that to obtain a preliminary injunction, the plaintiff had to show a substantial likelihood of success on the merits, potential for irreparable harm unless the injunction is issued, that the threatened injury outweighs possible damage that the injunction may cause the opposing party, and that the injunction would not disserve the public interest. Judge Thrash concluded that while AAER had the standing to bring its § 1981 claim, it had not shown a likelihood of success on the merits of its claim or any risk of it suffering irreparable harm.
This issue gains significance in the context of affirmative action practices being challenged after the US Supreme Court effectively ended the use of race in college admissions earlier this year.
The text of § 1981 stipulates that “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts… as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.”