ATLANTA, Georgia: In a case highlighting the battle over corporate diversity policies in the U.S., an Atlanta-based federal appeals court temporarily blocked a grants program for businesses run by Black women.

The 2-1 decision by the 11th U.S. Circuit Court of Appeals over the weekend temporarily prevented the Fearless Fund from running the Strivers Grant Contest, which awards $20,000 to businesses that are at least 51 percent owned by Black women.

On Sunday, the Atlanta-based Fearless Fund said it would comply with the order but remained confident that it would win in the lawsuit, brought by the American Alliance for Equal Rights, a group run by conservative activist Edward Blum.

The alliance argued that the fund violates a section of the Civil Rights Act of 1866, which prohibits racial discrimination in contracts.

In response, the fund said, "We strongly disagree with the decision and remain resolute in our mission and commitment to address the unacceptable disparities that exist for Black women and other women of color in the venture capital space."

The order reversed a ruling made on September 26 by U.S. District Judge Thomas W. Thrash, which denied the alliance's request to stop the program.

In a statement, Blum said, "The members of the American Alliance for Equal Rights are gratified that the 11th Circuit has recognized the likelihood that the Fearless Strivers Grant Contest is illegal. We look forward to the final resolution of this lawsuit."

The fund was established to provide further funding for Black female entrepreneurs, who receive less than one percent of venture capital funding.

The Fearless Fund has enlisted prominent civil rights lawyers, including Ben Crump, to defend against the lawsuit. They argued that the grants are not contracts but donations protected by the First Amendment.

However, the appeals court disagreed, arguing that the First Amendment "does not give the defendants the right to exclude persons from a contractual regime based on their race."