American Alliance for Equal Rights v. Fearless Fund Management, LLC

103 F.4th 765
CourtCourt of Appeals for the Eleventh Circuit
DecidedJune 3, 2024
Docket23-13138
StatusPublished
Cited by7 cases

This text of 103 F.4th 765 (American Alliance for Equal Rights v. Fearless Fund Management, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Alliance for Equal Rights v. Fearless Fund Management, LLC, 103 F.4th 765 (11th Cir. 2024).

Opinion

USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 1 of 63

[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

____________________

No. 23-13138 ____________________

AMERICAN ALLIANCE FOR EQUAL RIGHTS, Plaintiff-Appellant, versus FEARLESS FUND MANAGEMENT, LLC, FEARLESS FUND II, GP, LLC, FEARLESS FUND II, LP, FEARLESS FOUNDATION, INC.,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Georgia USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 2 of 63

2 Opinion of the Court 23-13138

D.C. Docket No. 1:23-cv-03424-TWT ____________________

Before ROSENBAUM, NEWSOM, and LUCK, Circuit Judges. NEWSOM, Circuit Judge: In this appeal from the denial of a preliminary injunction, we are asked to decide whether the Fearless Strivers Grant Contest, an entrepreneurship funding competition open only to businesses owned by black women, violates 42 U.S.C. § 1981, which prohibits private parties from discriminating on the basis of race when mak- ing or enforcing contracts. We must also decide, as a threshold matter, whether the plaintiff, the American Alliance for Equal Rights, has standing to challenge the contest. After careful review, and with the benefit of oral argument, we hold (1) that the Alliance has standing and (2) that preliminary injunctive relief is appropriate because Fearless’s contest is substan- tially likely to violate § 1981, is substantially unlikely to enjoy First Amendment protection, and inflicts irreparable injury. We there- fore affirm the district court’s determination that the Alliance has standing to sue but otherwise reverse its decision and remand with instructions to enter a preliminary injunction. I A Fearless Fund describes itself as a “venture capital fund that invests in women of color-led businesses.” Its stated mission is to “bridge the gap in venture capital funding for women of color USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 3 of 63

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founders building scalable, growth aggressive companies.” 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. See Fearless Strivers Grant Contest Official Rules (“Official Rules”) at 12. Importantly for our purposes, the contest is open, by its own terms, only to “black females who are . . . legal U.S. residents.” Id. at 3. More particularly, to qualify for the competition, a business must be at least “51% black woman owned.” 2023 Fearless Strivers Grant Contest Information at 2. To select contest winners, Fearless assembles a team of three judges who evaluate eligible entries based on the “[v]iability and strength of [the] business,” “[h]ow the business intends to use the grant,” and “[p]otential for business growth.” Official Rules at 10. The judges assign scores for each category, and the entry with the highest composite score wins. Id. The tiebreaker is the “[p]otential for business growth.” Id. If a tie persists, Fearless “will bring in a tie breaking judge to apply the same judging criteria.” Id. Because Fearless’s contest has been challenged here under 42 U.S.C. § 1981, which prohibits race discrimination in the making and enforcement of “contracts,” whether the contest constitutes a contract is central to this dispute. Originally, the contest’s rules expressly warned applicants, in all caps, that “BY ENTERING THIS CONTEST, YOU AGREE TO THESE OFFICIAL RULES, USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 4 of 63

4 Opinion of the Court 23-13138

WHICH ARE A CONTRACT . . . .” Official Rules at 3. The rules provided that the contest winner would receive $20,000 and other tangible benefits. Id. at 12. The rules then went on to explain that, in exchange, Fearless would obtain the right to “discuss or other- wise disclose the ideas” in the contestant’s entry “or otherwise use th[ose] ideas without any additional compensation,” id. at 8, as well as the right to use the contestant’s name, image, and likeness for “public relations, advertising, promotional purposes,” and in other “media,” and that the contestant would release and indemnify Fearless for various liabilities and agree to forgo litigation in favor of arbitrating any and all disputes. Id. at 13. Shortly after the Alliance brought suit, Fearless made changes to the contest rules. Most conspicuously, the rules were amended to eliminate the acknowledgment that they constituted “A CONTRACT.” The new rules also vested the Foundation with “sole discretion” to “void and disqualify” entries that undermine its philanthropic agenda, such as those that espouse “any particular political agenda or message” or “communicat[e] messages incon- sistent with the positive images” with which the Foundation wishes to associate. See Fearless Strivers Grant Contest Amended Rules. Although the amended rules tweaked the obligations and benefits exchanged by Fearless and winners, the contest’s basic out- line remained the same: An entrant still had the chance to win $20,000 and obtain benefits in exchange for its submission, it still had to give Fearless permission to use its submission, and it still had to waive various claims that it might have against Fearless. Id. at 18, 21. USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 5 of 63

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Fearless planned to run the contest four successive times. Each entry period lasted a month, at the end of which Fearless would select a winner and, within several days, present the award. B The American Alliance for Equal Rights is a § 501(c)(3) membership organization that, according to its founder, is dedi- cated to “ending racial classifications and racial preferences in America.” In this case, the Alliance represents several members— identified in this lawsuit as Owners A, B, and C—all of whom op- erate their own businesses and wish to participate in Fearless’s con- test but are not black women. The Alliance sued Fearless the day after applications opened for the fourth entry period, challenging the contest under 42 U.S.C. § 1981. In particular, the Alliance contended (1) that Fearless’s con- test constitutes a contract for § 1981 purposes because entrants en- ter into a bargained-for exchange with Fearless when they apply and (2) that the contest violates § 1981 because, by its terms, it cat- egorically excludes non-black applicants from eligibility because of their race. The Alliance sought a preliminary injunction to prevent Fearless from closing the application process. As relevant here, Fearless opposed Alliance’s request on three grounds. First, Fearless asserted that the Alliance lacked standing to sue because the individuals it purported to represent— Owners A, B, and C—were proceeding pseudonymously and hadn’t adequately alleged that each member suffered a concrete and particularized injury. Second, Fearless argued that § 1981 USCA11 Case: 23-13138 Document: 125-1 Date Filed: 06/03/2024 Page: 6 of 63

6 Opinion of the Court 23-13138

didn’t apply both because the contest isn’t a contract and because it constitutes a valid “remedial program.” Finally, Fearless argued that even if § 1981 applied to the contest, the First Amendment pro- tects it.

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103 F.4th 765, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-alliance-for-equal-rights-v-fearless-fund-management-llc-ca11-2024.