NEW YORK (news agencies) — Sophia Danner-Okotie’s has ambitious plans for her Nigerian-inspired clothing line but a sense of dread has punctured her optimism as she watches a legal battle being waged against a small venture capital firm that has provided funding instrumental to her boutique brand’s growth.
The case against the Fearless Fund alleges that one of its grant programs discriminates against non-Black women and asks the courts to imagine a similar program designed only for white applicants. It is among a growing list of lawsuits against corporate diversity and inclusion programs that are making their way through the courts this year.
Most have been filed by conservative activists encouraged by the Supreme Court’s June ruling ending affirmative action in college admissions and are now seeking to set a similar precedent in the working world.
The battle has been a roller coaster of setbacks and victories for both sides, but some companies are already retooling their diversity programs in the face of legal challenges, and the growing expectation that the conservative-dominated Supreme Court will eventually take up the issue.
One conservative activist, Christopher Rufo, claimed another victory this month with the resignation of Harvard’s first Black woman president, Claudine Gay, after allegations of plagiarism and a furor over her congressional testimony about antisemitism.
Rufo, who has cast Gay’s appointment to the job as the culmination of diversity and inclusion efforts that have sidelined conservative voices in higher education, vowed on the social media platform X, formerly known as Twitter, not to “stop until we have abolished DEI ideology from every institution in America.”
Dozens of prominent companies have already been targeted, as well as a wide array of diversity initiatives, including fellowships, hiring goals, anti-bias training and contract programs for minority or women-owned businesses.
Some challenges have focused on policies adopted after the 2020 protests over George Floyd’s killing by police as companies pledged more efforts to redress racial inequalities in the workplace. But others have targeted decades-old diversity programs that anti-affirmative action advocates have long tried to dismantle.
Diversity and inclusion experts say the legal backlash is already having a chilling effect over corporate efforts to address workplace inequality at a time when investment and interest in such initiatives have slowed following the post-Floyd surge.
Job openings for diversity officers and similar positions have declined in recent months. The combined share of venture capital funding for businesses owned by Black and Latina women has dipped back to less than 1% after briefly surpassing that threshold — at 1.05% — in 2021 following a jump in 2020, according to the nonprofit advocacy group digitalundivided.
The case against the Fearless Fund, which provides early-stage funding to businesses led by women of color, exemplifies the unpredictable legal landscape.
In late September, a federal judge in Atlanta refused to block a Fearless Fund grant contest for Black women business owners, saying they are donations protected by the First Amendment and the lawsuit was likely to fail. But days later, a three-judge federal appeals panel suspended the contest, calling it “racially exclusionary” and saying the suit was likely to succeed.
“Am I going to be able to apply to grants like these? Are they even going to exist?” said Danner-Okotie, who received $10,000 from a separate Fearless Fund grant. “With this last ruling, it seems like no.”
Danner-Okotie first saw the potential for scaling her clothing brand when the COVID-19 pandemic shut down the boutiques and fairs that carried her designs. Searching for ways to increase her online sales, she landed a contract with subscriber-based retailer Stitch Fix and used a government pandemic relief loan to fulfill the order. But when she tried to build on that success, she ran into roadblocks as banks declined her loan applications, deeming her business model risky since her clothes are handmade by Nigerian tailors.
The Fearless Fund, Danner-Okotie said, grasped her mission of designing clothes for American women looking to celebrate their African heritage. The grant was a game changer, allowing her to contract a factory in India to make uniquely designed fabrics for her team of tailors in Nigeria.
But now, future funding from the program is in jeopardy. The lawsuit against the Fearless Fund is being brought by the American Alliance for Equal Rights, a nonprofit founded by anti-affirmative action activist Edward Blum, the man behind the college admissions cases the Supreme Court ruled on in June. The outcome of the case could be a bellwether for similar diversity programs.
Oral arguments in the case are scheduled for Jan. 31.
Faced with a messy legal landscape, companies are being cautious. Most major companies have stuck by diversity initiatives that many ramped up in the face of pressure from some shareholders, employees and customers. Starbucks and Disney are among companies that have so far prevailed in court against challenges to their inclusion policies.
But some have made changes to diversity programs to try to protect them from legal scrutiny.
Among those are two prominent law firms that had faced lawsuits by Blum’s group. The firms, Morrison Foerster and Perkins Coie, opened their diversity fellowship programs to all applicants of all races in October, changes the companies said were in the works before Blum’s lawsuits, which he subsequently dropped.
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