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Since the Supreme Court ended race-conscious admissions programs and reversed affirmative action in June, right-wing activist groups nationwide have been filing complaints and lawsuits against companies, governments, and venture capitalists testing the constitutionality of their DEI programs.
However, some recipients of these lawsuits have found ways to fight back. They've revised their programs' eligibility criteria and even persuaded one conservative legal group to withdraw its discrimination lawsuit.
"Being a leader in the effort to remove barriers and create opportunities in the legal profession has made us a target," says Eric T. McCrath, chair of the San Francisco-based law firm Morrison Foerster, which recently resolved one of these suits. "But Morrison Foerster's commitment is steadfast and unshakeable."
On August 22, the American Alliance for Equal Rights, a group created by anti-affirmative-action crusader Edward Blum, filed a lawsuit against Morrison Foerster, asserting that the firm's Keith Wetmore Fellowship for Excellence, Diversity and Inclusion was unlawful. "Morrison has been racially discriminating against future lawyers for more than a decade," the lawsuit alleged.
The program, which began in 2012, previously accepted only students "who are members of historically underrepresented groups in the legal industry." After changing its eligibility requirements by removing the phrase "underrepresented groups" from its diversity program criteria, the suit was dropped entirely, a firm spokesperson confirmed. According to a detailed breakdown of the fellowship on the company's website, applicants for the 2024 program now must show a demonstrated commitment to promoting diversity, inclusion, and accessibility and showcase how they've faced and triumphed over adversity. But they no longer have to come from a specific racial or cultural group.
Morrison Foerster was already implementing revised eligibility criteria for the fellowship, including by updating its promotional and recruiting materials when the company received the complaint, a firm spokesperson confirmed. To help shut down the case, the firm provided AAER with a sworn declaration.
"We are pleased by AAER's decision not to pursue a meritless case, and look forward to welcoming another talented class of Wetmore Fellows to the firm this summer," said McCrath.
Other firms and companies are finding success by proactively changing language to qualify for their programs. Five Republican state attorneys general sent a warning letter on August 29 to the nation's top 100 law firms to "ensure that you fully comply with your legal duty to treat all individuals equally--without regard to race, color, or national origin--in your employment and contracting practices." In response, Gibson, Dunn & Crutcher, another law firm, adjusted their scholarship criteria in September to avoid the state attorney general following up with an actual suit, Bloomberg Law reported. The firm's $50,000 diversity and inclusion scholarship, which previously went to students "who identify with an underrepresented group," has been expanded to anyone who has "demonstrated resilience and excellence on their path toward a career in law," according to Bloomberg.
The strategy also may work for the pharmaceutical company Pfizer. In September 2022, Do No Harm, a nonprofit launched to oppose diversity initiatives in medicine filed a lawsuit against pharmaceutical company Pfizer over the criteria for its Breakthrough Fellowship program. Pfizer clarified that anyone of any race who is a junior in college and meets other non-race-based criteria can apply, Reuters reported. A judge threw out the initial case, saying the group lacked standing. But Do No Harm appealed to a higher court, saying Pfizer still aims to increase leadership diversity at the company. The case is pending in the Second U.S. Circuit Court of Appeals. Pfizer declined to comment for this article.
Edward Blum, conservative legal strategist and president of the American Alliance for Equal Rights, explained in an email why he thinks these suits are valuable.
"The venture capital funding gaps between the races is never a legal or moral justification to exclude certain men and women from public programs by race or ethnicity," he said. "The American Alliance for Equal Rights believes it is legally permissible to provide benefits to businesses and individuals who are under-resourced, but those benefits must be made available to all races and ethnicities."
But experts say banning such grants will undo years of progress made toward helping underserved communities get an equal footing in the space. Other companies facing these allegations, or even those simply fearing them, may aim to preemptively change their messaging or programs entirely, notes Angela Lee, professor of professional practice at Columbia Business School. Doing so, she says, will only dampen progress that's been made through DEI programs over the last five to ten years.
"It's scary," says Lee. "We should be out there talking about this, talking about bringing more capital to diverse founders, and these lawsuits are causing the opposite."
In addition to Blum's American Alliance for Equal Rights, groups like America First Legal Foundation (led by former Trump adviser Stephen Miller) and the Wisconsin Institute for Law and Liberty (a nonprofit law firm that has litigated on school choice, voting rights, and a range of other issues in the name of "individual liberty") have all set out to target individual companies with lawsuits. Legal experts say these groups hope one case eventually reaches the Supreme Court.
Funding support for some of these groups continues to grow. America First Legal Foundation, for example, has reportedly raised $44 million in 2022, a nearly 600 percent jump from their 2021 earnings of $6 million, according to tax filings reviewed by Bloomberg.
"They want to scare people out of helping each other," says Brian Brackeen, founder of investment firm Lightship Capital, about such conservative-backed groups. "They want to keep the status quo, which is nearly 99 percent of all dollars under management going to White men. They know they can't win this fight, but if they can slow progress, that's a win for them."
But making these compromises can have an even bigger impact on companies helping startups. In August, the American Alliance for Equal Rights sued the Fearless Fund, an Atlanta-based venture firm, claiming the fund's grant program geared toward Black women violated a section of the Civil Rights Act of 1866 that "protects the equal right of all persons ... to make and enforce contracts without respect to race." On October 3, 2023, a federal judicial panel blocked the firm from providing $20,000 grants to women founders of color from its foundation. That's a huge setback for the Fearless founders, who invested nearly $27 million in roughly 40 businesses and awarded another $3.7 million in grants to diverse business owners.
"Corporations, law firms, and others who made these pledges should remember they did so in part because Black Americans are spending more, voting more, and are starting more businesses," says Arian Simone, co-founder and CEO of the Fearless Fund. "While they might feel the pressure to give in to these relentless challenges, those decision-makers should consider the adverse impact people would hold them accountable for if they back out of those promises."
Additionally, in August, a lawsuit against Hello Alice by conservative-backed nonprofit America First Legal (AFL) claimed that the online platform for business owners' grant program for Black-small business owners to use toward the purchase of a new vehicle is unconstitutional because it limits the participation of certain racial groups. The Hello Alice founders have distributed over $38 million in grants since its founding in 2015.
"With all of these lawsuits, it's very clear that they are trying to change the precedent," says Elizabeth Gore, co-founder of Hello Alice. "We feel very strongly that if there is a goal to change the interpretation of the law, that should not be done in a frivolous lawsuit against the private sector; that should be done in Congress."
These lawsuits are especially troubling because diversity remains a long-standing problem in the distribution of funds for entrepreneurs. Black people represent fewer than 3 percent of business owners while making up 14.2 percent of the U.S. population, according to the Brookings Institution, a nonpartisan research group. In 2022, Black and Latino founders received only 1 percent and 1.5 percent of total U.S. venture capital funding, according to a June 2023 report from McKinsey and Company. Women-founded teams received 1.9 percent of funds, and only 0.1 percent of VC funds went to Black and Latino women founders.
"Black businesses have been locked out of the banking system, the real estate system, the private equity system, and the venture capital system for decades," says Mike Morial, former mayor of New Orleans and CEO of the National Urban League, a historic civil rights and urban advocacy organization. "The mere fact that we need these types of programs to level the playing field is indicative of the problem we have in America."
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