Black-Women-Only Grant Program Likely Violates Federal Law, Isn't Protected by First Amendment

From American Alliance for Equal Rights v. Fearless Fund Mgmt., LLC, decided today by the Eleventh Circuit, in an opinion by Judge Kevin Newsom, joined by Judge Robert Luck:

[We hold that] the Fearless Strivers Grant Contest, an entrepreneurship funding competition open only to businesses owned by black women, [likely] violates 42 U.S.C. § 1981, which prohibits private parties from discriminating on the basis of race when making or enforcing contracts …, [and] is … unlikely to enjoy First Amendment protection ….

[The] stated mission [of Fearless Fund] is to "bridge the gap in venture capital funding for women of color founders building scalable, growth aggressive companies." In pursuit of that mission, Fearless supplies grants to businesses under its "Foundation" arm. Fearless makes those grants on the basis of a competitive application process.

The "Fearless Strivers Grant Contest" offers four winners $20,000 apiece and digital tools to assist with business growth, as well as mentorship….

The panel majority began by concluding that the contest is likely covered by 42 U.S.C. § 1981, a federal law that has been read as generally banning race discrimination (but not discrimination based on sex, religion, sexual orientation, and so on) in all public or private contracts (not just employment, public accommodations, education, and the like):

[A] winning entrant obtains $20,000 and valuable mentorship and, in return, grants Fearless permission to use its idea, name, image, and likeness for promotional purposes and agrees to indemnify Fearless to arbitrate any disputes that might arise. By any measure, that is a bargained-for exchange supported by good and sufficient consideration. It is, in other words, a contract.

On appeal, Fearless seeks to recast its contest as nothing more than a vehicle for conveying "discretionary gifts" that confer "no enforceable rights on contest entrants." We don't think so. As already explained, the contest ends in the formation of a contractual relationship between Fearless and the winner. And it's no answer to say that the contest itself merely facilitates the making of the eventual contract. The Supreme Court has made clear that § 1981 protects "would-be contractor[s]"— here, the contestants—to the same extent that it protects contracting parties.

The majority also concluded that the grant program likely couldn't be justified "under a judge-made exception [to § 1981] applicable to what Fearless calls valid 'remedial programs.'" Section 1981 protects all racial groups, not just racial minorities, McDonald v. Santa Fe Trail Transp. Co. (1976), and any remedial-program exception (if it survives Students for Fair Admission) is narrow:

A private, race-conscious remedial program, the Court said, is valid if it (1) addresses "manifest racial imbalances" and (2) doesn't "unnecessarily trammel" the rights of others or "create[] an absolute bar to" the advancement of other employees…. Fearless's contest … unquestionably "create[s] an absolute bar" to the advancement of non-black business owners….

The panel then rejected any First Amendment right to discriminate based on race in such grant contracting programs:

[T]he Supreme Court has extended the First Amendment's reach to protect even so-called "expressive conduct." But … the Supreme Court has clearly held that the First Amendment does not protect the very act of discriminating on the basis of race.

Like this case, Runyon v. McCrary (1976), involved a collision between § 1981's prohibition on race discrimination in contracting and an alleged First Amendment right. There, black children alleged that private schools had violated § 1981 by denying them admission on account of their race. As relevant here, the schools defended on the ground that the First Amendment protected their right to "associat[e]" with those of their choosing. In rejecting the schools' defense, the Supreme Court reaffirmed that the First Amendment guarantees a right "to engage in association for the advancement of beliefs and ideas" but denied that it extended to the act of discriminating on the basis of race.

In particular, the Court "assumed that parents have a First Amendment right to send their children to educational institutions that promote the belief that racial segregation is desirable, and that the children have an equal right to attend such institutions." But, in words with particular resonance here, the Court emphasized that "it does not follow that the [p]ractice of excluding racial minorities from such institutions is also protected by the same principle." The Court reiterated that "the Constitution … places no value on discrimination" and that while "[i]nvidious private discrimination may be characterized as a form of exercising freedom of association protected by the First Amendment … it has never been accorded affirmative constitutional protections." Cf. Hishon v. King & Spalding (1984) (rejecting a business's argument that "application of Title VII" to a female employee's sex-discrimination claim would "infringe constitutional rights of expression or association").

Since deciding Runyon, the Supreme Court has continued to recognize and enforce the critical distinction between advocating race discrimination and practicing it. In R.A.V. v. City of St. Paul (1992), for instance, the Court emphasized that "[w]here the government does not target conduct on the basis of its expressive content, acts are not shielded from regulation merely because they express a discriminatory idea or philosophy." Notably, the Court cited as examples of lawful regulations of such "acts" both Title VII's prohibition against employment discrimination and § 1981's prohibition on race discrimination in contracting. So too, in Wisconsin v. Mitchell, the Court cited Runyon as an example of a case in which it had "previously upheld against constitutional challenge" both "federal and state antidiscrimination laws" and reiterated R.A.V.'s invocation of Title VII and § 1981 as "examples of permissible content-neutral regulation[s] of conduct."

And it concluded that 303 Creative LLC v. Elenis (2023) didn't change this principle:

While the Supreme Court there recognized the web designer's First Amendment right to refuse to express messages with which she disagreed, it clarified that she didn't even claim a right to refuse to serve gay and lesbian customers. See 303 Creative (emphasizing the parties' stipulation that while the web designer would "not produce content that 'contradicts biblical truth' regardless of who orders it," she was "willing to work with all people regardless of classifications such as race, creed, sexual orientation, and gender" and would "'gladly create custom graphics and websites' for clients of any sexual orientation").

To be sure, the line between "pure speech" that arguably entails discriminatory sentiments and the very act of discrimination itself may at times be hard to draw. And to be sure, Fearless characterizes its contest as reflecting its "commitment" to the "[b]lack women-owned" business community.

The fact remains, though, that Fearless simply—and flatly—refuses to entertain applications from business owners who aren't "black females." If that refusal were deemed sufficiently "expressive" to warrant protection under the Free Speech Clause, then so would be every act of race discrimination, no matter at whom it was directed. And on Fearless's theory, the more blatant and rampant the discrimination, the clearer the message: To take just one particularly offensive example, surely a business owner who summarily fires all his black employees while retaining all the white ones has at the very least telegraphed his perspective on racial equality.

For better or worse, the First Amendment protects the owner's right to harbor bigoted views, but it does not protect his mass firing. Fearless's position—that the First Amendment protects a similarly categorial race-based exclusion—risks sowing the seeds of antidiscrimination law's demise….

The panel majority also distinguished the Eleventh Circuit's earlier decision in Coral Ridge Ministries Media, Inc. v. Amazon.com, Inc. (11th Cir. 2021), which the district court viewed as holding "(1) that 'donating money qualifies as expressive conduct' and (2) that 'except in perhaps the rarest of circumstances, no person in this country may be compelled to subsidize speech by a third party that he or she does not want to support.'":

First, our decision there had nothing to do with race discrimination, and Supreme Court precedent indicates that prohibitions on race discrimination are uniquely resistant to First Amendment challenges. Second, for reasons already explained, Fearless isn't simply donating money; it's orchestrating a bargained-for exchange in which both parties obtain valuable benefits and undertake meaningful obligations. Finally, Fearless isn't being compelled to "subsidize speech"; rather, the question here is whether Fearless's contest ought to receive First Amendment protection by virtue of its rule excluding non-black entrants. Coral Ridge has nothing useful to say about that.

Judge Robin Rosenbaum dissented, solely on the grounds that she thought plaintiffs lacked standing; those interested in this debate can see it in the full opinion.

Thomas R. McCarthy, Cameron T. Norris, Gilbert C. Dickey & R. Gabriel Anderson (Consovoy McCarthy PLLC) represent plaintiffs. [UPDATE: I originally credited one of the amicus's lawyers instead of plaintiff's; fixed now.]