A long-running anti-DEI lawsuit could help companies defend themselves from reverse-racism claims

Leadership·diversity and inclusionA long-running anti-DEI lawsuit could help companies defend themselves from reverse-racism claimsBy Lila MacLellanBy Lila MacLellanSenior WriterLila MacLellanSenior WriterLila MacLellan is a senior writer at Fortune, where she covers topics in leadership.SEE FULL BIO Elizabeth Gore, cofounder of Hello AliceJeenah Moon/Bloomberg—Getty ImagesWhen Elizabeth Gore received an two years ago informing her that America First Legal (AFL) was bringing a class-action lawsuit against her company, Hello Alice, she thought it was spam

According to its website, AFL exists to “oppose lawless government overreach and fight to restore the rule of law in the United States.”Gore couldn’t fathom why Miller’s organization would take an interest in her company, a -to- platform that serves mom-and-pop companies, offering them, for example, a data-backed assessment of their financial fitness, and potential access to a Hello Alice credit card and other forms of capital

She sees Hello Alice as part of a patchwork of companies, government agencies, and nonfits safeguarding one of the main paths to the American Dream itself

But the message wasn’t spam

The AFL kicked off a long, emotionally draining legal battle that has consumed Gore and her cofounder Elizabeth Rodz ever since, Gore explains, even as Hello Alice has continued to grow

Though the battle is playing out far from the national spotlight, it’s viding a testing ground for legal arguments that might help companies defend their diversity-oriented grams against claims of reverse racism

The legal challenge was brought on behalf of Nathan Roberts, a white man in Ohio who owns a company called Freedom Truck Dispatch

Last year, the tussle briefly appeared to be over: A federal judge in the Northern District of Ohio agreed to dismiss the case because the plaintiffs failed to show that Roberts would have won the grant if the competition for it had been race-neutral

In legal terms, he didn’t have “standing” to bring the case, a finding related to a couple of specifics the situation. (For one, Roberts didn’t apply for the grant during the application window and sued the company only after the window closed.) But America First Legal appealed that decision, and in late July the lawsuit came before the Sixth Circuit appellate court in Cincinnati, where the AFL again argued their client suffered an injury because he wasn’t able to apply for the grant

Now, based on the discussion before a three-judge panel at the Sixth Circuit, it appears that the Hello Alice lawsuit will solidify a reliable, if unsexy tool that companies can use to defend against claims of reverse racism in anti-DEI campaigns: arcane rules and nicalities

For years, corporations have used cedural grounds to evade charges of discrimination in employment-related lawsuits brought by people of color, women, LGBTQ+ employees, and others

The Hello Alice case may show that companies can successfully tect themselves against politically motivated anti-DEI lawsuits the same way. “We were really gratified by the court’s questions,” Neal Katyal, a minent attorney who leads the Supreme Court and appellate practice at the Washington, D.C. law firm Milbank, and is representing Hello Alice, told Fortune

Indeed, many of those questions definitively zeroed in on cedural issues. (The court asked, for example, what Hello Alice’s terms and conditions prevented the AFL’s client from applying for the grant.) “They obviously had read everything and asked exactly the right questions

And we very much look forward to the Court’s resolution of this case.” Issues these could help defendants scuttle cases before the two sides even apach larger questions, including: Was the federal contract law in question ever meant to help address reverse discrimination? (For the record, Hello Alice argues it was not.) And is giving money away as a grant a form of free speech, similar to making political donations? (The 11th Circuit Court has rejected that argument in a separate case, but the matter hasn’t reached the Supreme Court.) The outcome of the Hello Alice case may also signal to es that they don’t need to preemptively roll back grams for marginalized groups out of fear

AFL did not immediately respond to a request for

Fortune attempted to reach Freedom Truck Dispatch but found a phone number listed for the company was out of service

The cofounders also spend part of their time advocating for small owners and raising funds for philanthropic grants

To date, Hello Alice has issued $60 million in small grants across the U.S., according to Gore. “Part of our commitment since day one was to ensure that small es who have some kind of barrier to entry, that we dig in and ensure they’re part of the platform,” she says

The company has helped veterans, for example, and women who’ve been in the care economy, both groups of people who may not have the credit histories needed to launch a company

The company is facing off against a movement that has lately gained momentum

Conservative activists who assert that corporate diversity, equity, and inclusion efforts are a form of reverse discrimination have been emboldened by support from the judiciary system and the White House

Separately, President Trump issued executive orders this year that banned certain types of DEI at companies with federal contracts and warned that his administration would investigate private sector firms discovered to be the most “egregious” offenders of DEI

Whether the Hello Alice case will answer larger questions DEI’s legality remains to be seen. “Initially, this case presented the big question: Can affirmative action be permissible in the corporate setting?” Katyal explained. “But the trial court said that the plaintiffs didn’t even get to ask that question

They weren’t allowed to because they didn’t meet the legal requirements to be able to bring a case in federal court.” Now, says Katyal, the question before the Sixth Circuit is, “‘Can someone try and complain a gram to give grants to minority-owned es when they can’t even allege they would have gotten the grants anyway?’” Gore and attorney Neal Katyal outside the courthouse in Cincinnati where a panel from the Sixth Circuit Court of Appeals heard arguments in Hello Alice’s case in July

Courtesy of Hello Alice As the legal battle has played out for Hello Alice, Gore has found support from friends and clients across the political spectrum. “We’re based in Houston, Texas, and [there’s a large] amount of folks who you would think would be against us, and they weren’t,” she said, adding, “Think traditional white male biker companies and trucking companies.” Gore says the owners who have discussed the issue with her—whether they identify as Republican or Democrat—don’t think the government should be telling es how to deploy their money

That’s what her legal team believes, too: Private es should have the freedom to run or reject affirmative action grams the grants for Black es

Whether such DEI initiatives are good for a company, morally justified, or, as the AFL claims, racist, should be debated in a boardroom and not in a federal court

And there is nothing inherently illegal a private company offering a grant dedicated to a minority population

Playing offense Lately, many companies have rolled back cohort-specific DEI grams just to avoid the kinds of costly headaches that Hello Alice has faced

Kenji Yoshino, a constitutional law fessor at NYU School of Law and director of its Meltzer Center for Diversity, Inclusion, and Belonging, believes that’s the right apach for our times

Yoshino explains that his center has been “beating the drum on moving from cohorts to content.” That is, he suggests companies make grams such as diversity-focused fellowships in the workplace available to anyone who wants to apply, without changing the ultimate mission of the fellowship. “That really allows a company to do an end run around the SFFA decision,” he says

At the same time, he applauds Gore for sticking with her gram for Black owners and preparing to advance not only the nical argument in the lawsuit—showing that the white male trucker doesn’t have the ground to sue—but perhaps much more

If Gore or another owner can get the law to say that they are merely expressing their views with DEI grant grams, says Yoshino, “that would be the biggest win of all.” Finding levity Sticking with this lawsuit has not been an easy decision

When it first hit, Hello Alice was in the middle of a Series C raise, and Silicon Valley Bank, its second-biggest investor, had just collapsed

Hello Alice also had to disclose the lawsuit to other investors, “and there was this fear factor around AFL,” says Gore. “So that capital flew out the door.” But there was a lot at stake, she adds

The night before the Sixth Circuit oral arguments, she had dinner at a restaurant near the courthouse in Cincinnati

It turned out that the restaurant, Frankie’s, was a Hello Alice customer

For Gore, it was a reminder of the importance of her work

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