The nonprofit and philanthropic sectors are at growing risk for lawsuits challenging DEI (diversity, equity, and inclusion) measures, fellowship and intern practices, giving and grantmaking procedures, and even the provision of basic services. That’s thanks to a new wave of litigation, some of it already making its way through US courts, seeking to challenge virtually any consideration of race in myriad institutional practices and decisions.
Such are the warnings sounded by some legal experts as new legal “test cases” have mounted, challenging race-informed grantmaking processes by nonprofits. In the wake of the 2023 US Supreme Court decision ending affirmative action as practiced in colleges and universities, experts say these cases could be the tip of an anti-DEI legal iceberg for nonprofits and philanthropic institutions.
The nonprofit and philanthropic sectors are at growing risk.
“A lot [of] our clients, whether they are nonprofits or for-profit companies, are facing a really different political landscape with regard to legal liabilities,” says Ann O’Leary, an attorney for the Chicago-based law firm Jenner & Block, whose practice includes advising nonprofit organizations on these legal questions.
The new uncertainty means some nonprofits and philanthropic institutions may have to grapple with difficult and potentially uncomfortable questions as they assess their own level of risk.
“[Many nonprofits] do not have the resources, the ability sometimes, to deal with these fights,” O’Leary warns.
Jenner & Block’s Marcus A.R. Childress, who co-chairs the firm’s DEI Protection Task Force, says confronting such litigation could force nonprofits and philanthropies to face profoundly difficult decisions.
“What’s more important to these nonprofits, to these companies?” asks Childress. “Is it doing the work…[they’ve] traditionally done, or is it lowering the risk of litigation?”
These legal attacks…represent a very intentional effort to expand attacks on DEI.
A Wave of Litigation
Much of the litigation brought to challenge DEI and other practices resembles that employed in a recent lawsuit brought against the Fearless Fund, an Atlanta-based nonprofit whose mission includes “empower[ing] African-Americans to gain access to capital,” and which awards grants to business ventures by Black women.
The lawsuit, brought in 2023 by the American Alliance for Equal Rights (AAER), headed by conservative activist Edward Blum, essentially argues that Fearless Fund’s grantmaking process amounts to “explicit racial exclusion” and is prohibited by civil rights laws.
The AAER is also suing another nonprofit: Austin, TX-based Hidden Star, which awards small grants to women and minority-owned businesses. Both cases are currently pending in the courts.
“It started with higher education.…And then we saw a quick move to corporate diversity initiatives.”
The lawsuits have attracted attention across the nonprofit and philanthropic sectors. In December 2023, the Council of Foundations and Independent Sector filed a joint amicus brief on behalf of Fearless Foundation, arguing forcefully that philanthropic grants are protected under the First Amendment of the US Constitution.
Meanwhile, these legal attacks, notes Childress, represent a very intentional effort to expand attacks on DEI and race-informed initiatives beyond the narrow realm of affirmative action in colleges and universities to which the Supreme Court’s 2023 ruling was limited.
“It started with higher education, and we saw that play out with the Supreme Court this past summer. And then we saw a quick move…to corporate diversity initiatives,” says Childress. “I think now what we’re starting to see is the waves going from the corporate world now to the nonprofit space, the philanthropy space, grantmaking activities…and it’s using a lot of the same theories.”
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