In a split decision Monday, the Eleventh Circuit said that a Georgia federal judge should have blocked a Black-led venture capital firm from awarding grants to businesses owned only by Black women, opining that the practice was "substantially likely" to violate federal law barring racial discrimination in the writing of contracts.

U.S. Circuit Judge Kevin Newsom, writing for the court, said that Fearless Fund Management LLC's Fearless Strivers Grant Contest had stepped well beyond the bounds of First Amendment protections by refusing to award grants to applicants who were not Black females.

And because Fearless' own documentation for the grant application plainly states its rules "are a contract," Judge Newsom added, the provision is unenforceable under Section 1981 of the Civil Rights Act of 1866, which affords all Americans the same rights and benefits regarding contractual relationships.

The judge compared the grant process to a white business owner's decision to fire all of his Black employees, an equally untenable position.

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

But in a dissenting opinion, U.S. Circuit Judge Robin S. Rosenbaum said that the Texas-based right wing group American Alliance for Equal Rights had shown dubious standing in the case. None of the group's members who claimed they were denied the ability to apply for the grants, she said, had shown any genuine interest in doing so.

"Here, no one doubts the sincerity of American Alliance for Equal Rights's desire to challenge what it views as 'distinctions and preferences made on the basis of race and ethnicity.' … But as American Alliance has portrayed its members' alleged injuries, it has shown nothing more than flopping on the field," Judge Rosenbaum said, adding that she would have dismissed the appeal outright.

The Eleventh Circuit's opinion comes more than nine months after U.S. District Judge Thomas Thrash rejected American Alliance's bid for an injunction to block the grant program. The group, with backing from American Enterprise Institute fellow Edward Blum, sued in 2022 alleging the program was unlawfully discriminatory.

But last September, Judge Thrash ruled that the grants constituted monetary donations, falling outside the bounds of civil rights protection.

"The First Amendment protects the [Fearless Fund] defendants' right to decide what message they want to promote, and that's what the First Amendment is all about," Judge Thrash said. "The plaintiff disagrees with that message. They want the defendants to communicate a different message. Well, that's not the way it works."

On appeal, American Alliance argued that Fearless' claim of First Amendment protection was concealing the discriminatory intent behind the program.

"They argue they label their contest as a donation, and the discrimination itself is expressive," said Gilbert Dickey, representing American Alliance, during oral argument in January. "But this turns not on how they label it but how a reasonable person would view it."

As to Fearless' position that its grants were mere charitable contributions outside of Section 1981's reach, Judge Newsom wrote, "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," he said.

The judge added a swipe at Judge Rosenbaum's continued invocation of "flopping" in her dissent.

"Let us not forget: We're talking about real-live, flesh-and-blood individuals who were excluded from the opportunity to compete in Fearless's contest solely on account of the color of their skin," Judge Newsom said. "Respectfully, victims of race discrimination — whether white, black, or brown — are not floppers."

Counsel for the parties didn't immediately respond to a request for comment Monday.

U.S. Circuit Judges Robin S. Rosenbaum, Kevin C. Newsom and Robert J. Luck sat on the panel for the Eleventh Circuit.

American Alliance is represented by Thomas McCarthy, Cameron Norris, Gilbert Dickey and Gabriel Anderson of Consovoy McCarthy PLLC and William Fawcett of Chambliss & Fawcett LLP.

Fearless Fund is represented by Alphonso David of the Global Black Economic Forum, and Jason Schwartz, Lee R. Crain, Molly Senger, Mylan Denerstein, Naima L. Farrell, Gregg Costa and Zakiyyah Salim-Williams of Gibson Dunn & Crutcher LLP.

The case is American Alliance for Equal Rights v. Fearless Fund Management LLC et al., case number 23-13138, in the U.S. Court of Appeals for the Eleventh Circuit.