Lawyer For Black-Women-Only Fearless Fund Contest Admits “Whites Only” Would Be Okay If 11th Circuit Rules Their Way

Lawyer For Black-Women-Only Fearless Fund Contest Admits “Whites Only” Would Be Okay If 11th Circuit Rules Their Way

We have been following an important case out of Georgia concerning a grant contest for small business that is only open to Black businesswomen. Our original post on the case concerned a federal trial-level court in Atlanta that issued a ruling that, if upheld, would eviscerate the entire legal regime of anti-discrimination laws, Georgia Federal Judge Rules Racially Discriminatory Contracting Is “Speech and Expression” Protected By 1st Amendment – Emergency Appeal Filed:

Affirmative Action sure does make strange alliances. In this case, a desire to defend a grant program open only to black women may bring down the entire anti-discrimination legal infrastructure that has been in place for over 150 years, if a District Court ruling that racially discriminatory contracting is “speech and expression” protected by the First Amendment is not reversed….

The absurd implications of the District Court Order are apparent. Can a building owner say that having a “whites only” bathroom is speech and expression entitled to First Amendment protection. You probably can think of dozens of other counter-examples.

The civil rights groups supporting the racially discriminatory grant program at issue and arguing that discriminatory contracting is speech do not appreciate the implications of this District Court Order being upheld. They are so angry at Ed Blum for winning the Harvard case that they would rather see the entire regime of anti-discrimination laws cast aside so long as Blum does not win again.

Interestingly, the federal District Court rejected most of the arguments made by the Fearless Fund Defendants in the case. They (i) had argued that the organizational member Plaintiff had no standing because its members were anonymous, (ii) had argued that the racially discriminatory contest at issue was not a contract subject to 42 U.S.C. § 1981, the federal statute outlawing racial discrimination in contracting, and (iii) had argued that the racially discriminatory contest at issue was a valid affirmative action plan which is allowed in some very narrow circumstances. The federal District Court disagreed with all three arguments, but, as mentioned, held that the contest was okay because it constituted free speech protected by the First Amendment. You can review that Order here.

The Emergency Appeal

Fortunately, the Plaintiff in the case, the American Alliance for Equal Rights, immediately filed an emergency appeal with the 11th Circuit U.S. Court of Appeals (which covers Florida, Georgia, and Alabama) and simultaneously filed an emergency motion for injunction pending appeal. And, in a stunning, lightning-quick move, four days after the appeal and emergency motion were field, the 11th Circuit GRANTED Plaintiff’s Motion for an Injunction Pending Appeal, stopping the racially discriminatory grant contest in its tracks: Black-Women-Only Grant Program Halted, 11th Circuit Issues Injunction Pending Appeal in Fearless Fund Case:

The Court of Appeals for the 11th Circuit just issued an Injunction Pending Appeal completely rejecting the District Court’s use of the First Amendment to excuse discriminatory contracting….

The plaintiff’s motion for an injunction pending appeal is GRANTED…For the reasons stated in the plaintiffs motion for an injunction, we conclude that the plaintiff has established that the defendants’ racially exclusionary program – the “Fearless Strivers Grant Contest” – is substantially likely to violate 42 U.S.C. § 1981.

The district court held that the plaintiff “clearly” has standing and has “clearly shown the existence of a contractual regime that brings this case within the realm of § 1981.” But the district court reasoned that Section 1981 was likely unconstitutional under the First Amendment as applied to the defendants. We disagree. The defendants do not provide “expressive services” or otherwise engage in “pure speech.” 303 Creative LLC v. Elenis, 143 S. Ct. 2298, 2318 (2023). Although the First Amendment protects the defendants’ right to promote beliefs about race, it does not give the defendants the right to exclude persons from a contractual regime based on their race. Runyon v. McCrary, 427 U.S. 160, 176 (1976)….

In light of the plaintiffs’ likelihood of success on the merits, the plaintiffs have established an irreparable injury and that the balance of equities and public interest favor an injunction. See Gresham v. Windrush Partners, 730 F.2d 1417, 1424 (11th Cir. 1984). Accordingly, the defendants Fearless Fund Management, LLC, Fearless Fund II, GP, LLC, Fearless Fund II, LP, and the Fearless Foundation, Inc., are ENJOINED from closing the application window or picking a winner for the “Fearless Strivers Grant Contest” until further order of this Court.

[emphasis added]

One odd thing about the 11th Circuit’s GRANT of the Plaintiff’s motion for injunction pending appeal is that it was decided by a three-judge “motions” panel on an emergency basis, and the judges actually ruled 2-1 on the issue, meaning that there was a dissent, written in this case by Judge Charles R. Wilson. He argued that the racially discriminatory contest was okay because it benefited Black persons, and the Plaintiff’s members were White, a group (he argued) having no rights under 42 U.S.C. § 1981. The 2-judge majority disagreed:

Unlike the district court, our dissenting colleague concludes that the plaintiffs Section 1981 claim is unlikely to succeed because the organization is supposedly “bringing a§ 1981 claim on behalf of white members.” Our dissenting colleague reasons that “[t]he inclusion of Asian business owners, while a racial minority, does not cure the inclusion of white business owners.” We disagree. The Supreme Court has held that Section 1981 “was meant, by its broad terms, to proscribe discrimination in the making or enforcement of contracts against, or in favor of, any race.” McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 295 (1976). We find no support in our caselaw to limit the standing of a membership organization to file a Section 1981 claim because it has members of many different races.

[emphasis added]

Following the 11th Circuit’s grant of the Plaintiff’s Motion for Injunction Pending Appeal, the court published a scheduling order requiring the Plaintiff, now an “Appellant,” to file its regular Appellant’s Brief by November 6. Which it did. You can review the Appellant’s Brief here. Although the 11th Circuit had already “agreed” with the Appellant, it did so on an emergency basis after only several days of foreshortened briefing, so at present the appeal is proceeding on its normal track of normal, lengthy briefing and oral argument.

EPP’s Amicus Brief

Following the filing of the Appellant’s Brief, the Equal Protection Project (EPP) filed an amicus curiae, or “friend of the court,” brief supporting Plaintiff, as we reported: Equal Protection Project Files Brief Opposing Black-Women-Only Grant Program in “Fearless Fund” Appeal:

In its brief, the Appellant makes the case, agreeing with the court, that while the First Amendment provides powerful protection for free speech, it cannot override 42 U.S.C. § 1981’s prohibition of racially discriminatory contracting:

Racial discrimination in contracting is not protected [by the First Amendment] because it is conduct, not speech. Section 1981 is an example of a permissible content-neutral regulation of conduct. [Section] 1981 does not target conduct on the basis of its expressive content. The discriminatory acts that violate §1981 are not shielded from regulation merely because they express a discriminatory idea or philosophy.

But we at EPP felt that there was a point touched on in the Appellant’s prior briefs but really downplayed in the final Appellant’s brief that warranted more emphasis, namely the impact a ruling upholding discriminatory contracting might have:

But what Appellant omits in its brief, which it had touched on in its earlier district court briefing and in its motion for injunction pending appeal, is the impact affirmance of the district court’s order would have on race relations. As Professor Jacobson stated:

The absurd implications of the District Court Order are apparent. Can a building owner say that having a “whites only” bathroom is speech and expression entitled to First Amendment protection. You probably can think of dozens of other counter-examples.

So, to add emphasis to the enormous importance of the 11th Circuit reversing the District Court Order and ruling that racially discriminatory contracting violates 42 U.S.C. § 1981, the Equal Protection Project has filed an amicus curiae, or “friend of the court” brief, in the 11th Circuit. You can review the brief here.

We emphasized in EPP’s brief that the consequences of upholding racial discrimination in contracting is something Fearless Fund (now Appellees in appeal lingo) hadn’t fully considered:

The district court’s order, if not reversed, will have a profoundly negative impact on EPP’s attempt to vindicate constitutional and statutory protections against racial discrimination, by carving out a massive loophole to characterize discriminatory conduct as protected speech….

[T]he district court held that Appellees “clearly intend[] to convey a particular message in promoting and operating [their] grant program,” and so Appellees’ racially discriminatory conduct was excused on First Amendment free speech grounds.

That is contrary to law….

EPP agrees with Appellant’s [previous] arguments as to the disastrous consequences that lie ahead, should the district court’s order be affirmed, based on EPP’s experience opposing racially discriminatory conduct….

One aspect of this case that Appellees appear not to have considered in their injunction pending appeal opposition papers is the impact affirmance of the district court’s order will have on the very minority individuals Appellees purport to be assisting. If Appellees prevail in this case, there would be nothing stopping another entity similar to Appellees from running an identical contest open only to entrepreneurs who are white. As Appellant [previously] state[d], if the district court’s opinion is affirmed, “[a] white-supremacist organization [could] contract only with white men to convey its message that they [too] are vital to the economy.”

Importantly, affirmance of the district court’s order would embrace the growth of an entire discriminatory, Jim Crow-like nationwide regime, where discrimination against any and all individuals based on any skin color would not only be legal, but it would also likely become the norm. All a business would have to do to evade liability is hold itself out as expressing a discriminatory opinion regarding the benefits its business solution provides to members of its preferred race.

In sum, this court must reverse the district court’s erroneous order that Appellees’ First Amendment speech rights trump conduct covered by 42 U.S.C. § 1981.

We also argued that Judge Wilson’s idea that Section 1981 only protected Black persons was totally wrong, based on binding U.S. Supreme Court precedent holding that Section 1981 is meant to outlaw any racial discrimination in contracting against any race.

Oral Argument at the 11th Circuit

On January 31, an 11th Circuit panel different from the one granting the Injunction Pending Appeal held oral argument on the question of whether a racially discriminatory grant contest runs afoul of 42 U.S.C. § 1981. The panel consisted of 11th Circuit Judge Robin S. Rosenbaum, presiding, and 11th Circuit Judges Kevin C. Newsom and Robert J. Luck.

The case was the fourth of four cases heard, the others being two federal criminal cases and a federal arbitration case. That is noteworthy because those cases took about 30 minutes each, but the Fearless Fund argument took 51 minutes! All three judges were clearly heavily engaged in this case and asked numerous questions of all three attorneys, interrupting them often to clarify the arguments presented. It is important to remember that although the previous “motions” panel had granted Plaintiff’s motion for injunction pending appeal, this was the appeal, and this morning’s panel was and is not bound by that previous ruling.

Arguing for Plaintiff/Appellant was Gilbert C. Dickey of Consovoy McCarthy’s Washington, DC office. Mr. Dickey, a former law clerk to U.S. Supreme Court Justice Clarence Thomas, started off strong on his main argument, which was that the racially discriminatory grant contest at issue was conduct outlawed by 42 U.S.C. § 1981, just like the “White’s Only” sign at a restaurant under the old Jim Crow days. In fact, there was so little questioning the judges moved on to another point, namely whether the contest was a valid affirmative action plan, allowable in some limited circumstances. Dickey argued that is was not because there was no valid affirmative action plan, it was just a racially discriminatory contest that presented a 100% bar to anyone not a Black businesswoman.

Arguing for Fearless Fund on all issues except standing was Jason C. Schwartz of Gibson, Dunn & Crutcher’s Washington, DC office, where he is “co-chair of the Labor & Employment Practice Group, General Counsel of the law firm and a member of the firm’s Executive Committee.” Mr. Schwartz argued that there have been hundreds of charities that have always been allowed to donate to various special groups, including racial groups, and those donations are not illegal because (i) they are considered “expressive activity” protected by the First Amendment, and (ii) they are not covered by 42 U.S.C. § 1981.

Because the argument was audio only I couldn’t tell whether Judge Luck or Judge Newsom asked the next question, but it was a dagger. Whoever it was asked, and I’m paraphrasing, “if what you say is true, then could an entity run a grant contest just like Fearless Fund’s but only open to Whites”? Mr. Schwartz said as repugnant as that eventuality might be, yes it meets the standard. The judge reiterated, “what if the charity in question’s “protected expression” was that they “didn’t like people of color”? Mr. Schwartz stated that it is “clear” that charitable giving is protected activity.

At this point, Professor Jacobson, who was listening to the oral argument as well, messaged me: “Civil Rights” Lawyer Argues Whites-Only Contracting Is Protected”

Mr. Schwartz also argued that this was the first case ever that attempted to apply 42 U.S.C. § 1981 to a charity, to which Judge Newsom replied, “Section 1981 doesn’t apply”?

Judge Luck posed a scenario where a company discriminates in which outfit it buys office supplies from. Mr. Schwartz said that would clearly violate 42 U.S.C. § 1981, but here there is core expressive activity, i.e. charity, which is protected by the First Amendment.

Judge Rosenbaum asked if there was a difference between a donation and a contract, and Mr. Schwartz said that the contract makes it even more expressive, because now you have more information about the recipient of the donation, so the expressive activity is even more expressive.

The last attorney to argue was Mylan L. Denerstein of Gibson Dunn’s New York office. Ms. Denerstein is “co-chair of [Gibson Dunn’s] Public Policy Practice Group and a member of the Crisis Management, White Collar Defense and Investigations, Financial Institutions, Labor and Employment, Securities Litigation, and Appellate Practice Groups…[She] is [also] global chair of the firm’s Diversity Committee and co-partner in charge of the New York office. Mylan was previously a member of the firm’s Executive Committee.” Ms. Denerstein argued that the Plaintiff had no standing because its three members were not identified, and because their affidavits in support of standing, saying that they were “ready and able” to apply for the contest, were insufficient.

On her first point, that Plaintiff’s members must be identified by name for the Plaintiff to have standing, Judge Newsom asked if that rule conflicts with cases from the District of Columbia Circuit and the Ninth Circuit and Ms. Denerstein admitted that it would. As for the affidavits, Judge Rosenbaum asked what steps Plaintiff should have taken to perfect the affidavits, and Ms. Denerstein responded that the affidavits had no information about anything, did not even say that the members would apply for the program, and that their attorney Mr. Blum’s declaration said that two of three of them were able to apply made them all questionable, which made one of the judges respond “but you only need one” right? To which Ms. Denerstein responded “Yes but they have zero.”

Mr. Dickey was given ten minutes of rebuttal time, and Judge Rosenbaum immediately stated that she didn’t think the Plaintiff’s members’ names needed to be identified, but that the affidavits seemed shaky to her. Mr. Dickey responded that previous cases had established that the language “ready and able” to apply for the program was all that was needed to establish standing. The judges seemed satisfied with that, with Judge Luck citing a U.S. Supreme Court case stating that “ready and able” was enough to establish standing.

Finally, Judge Newsom asked Mr. Dickey some detailed questions about when  charitable activity could be “expressive.”

Analysis

Our prediction is that the 11th Circuit will reverse the District Court and block the racially discriminatory Fearless Fund grant contest, for the following reasons:

1. Although the previous order enjoining the racially discriminatory Fearless Fund grant contest is not binding on this group of three judges, they obviously know about it and have studied it, and voiced no concern over it. In particular, none of the judges mentioned Judge Wilson’s dissent to that Order arguing that Section 1981 only is meant to benefit Black businesspersons.
2. The key question about whether Fearless Fund’s proposed rule would allow racial discrimination in favor of Whites and against Blacks (or any race for that matter), which Fearless Fund’s attorney agreed would happen, indicates to us that the judges have read EPP’s amicus curiae brief and are cognizant that allowing racial discrimination in favor of Blacks is a huge can of worms that could cause an explosion of discrimination of all sorts. No one should want to see that, and these judges sure didn’t seem like they did.
3. The standing argument (i.e. Plaintiff didn’t have standing to sue in the first place) seemed like a dead letter from the jump. In fact, it may have been a tactical blunder for Fearless Fund to devote such a large part of its argument to that issue, given that neither the District Court nor the previous 11th Circuit panel thought it had any merit.

We will be watching this case closely and will report when the 11th Circuit rules. This case could also very well be headed to the U.S. Supreme Court.

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