Sept 11 (Reuters) - An Atlanta-based venture capital

fund on Wednesday agreed to stop operating a program that

awarded grants to small businesses run by Black women to settle

a lawsuit by an anti-affirmative action group that claimed it

discriminated based on race.

Fearless Fund agreed to settle the case after a federal

appeals court in June agreed with the non-profit American

Alliance for Equal Rights that the program likely violated a

Civil War-era law barring racial discrimination in contracting.

The non-profit was founded by Edward Blum, who through a

different group spearheaded the litigation that led the

conservative-majority U.S. Supreme Court last year to bar the

consideration of race as a factor in college admissions.

The lawsuit against Fearless Fund was filed in August 2023

and targeted the fund's Fearless Strivers Grant Contest, which

awarded Black women who own small businesses $20,000 in grants

and other resources to grow their businesses.

According to the Fearless Fund, businesses owned by Black

women in 2022 received less than 1% of the $288 billion that

venture capital firms deployed.

The fund, headed by CEO and founding partner Arian Simone,

has said its goal was to address that disparity. Fearless Fund

counts JPMorgan Chase ( JPM ), Bank of America ( BAC ), and

MasterCard ( MA ) as investors, and the fund has invested nearly

$27 million into 40 startups led by women of color since 2019.

Lawyers for Blum's group argued that by only considering

Black women for grants, Fearless Fund had adopted a categorical

racial bar against other applicants in violation of Section 1981

of the 1866 Civil Rights Act.

A trial court judge initially sided with Fearless Fund. But

a 2-1 panel of the Atlanta-based 11th U.S. Circuit Court of

Appeals in June held the program likely violated the law,

warranting a preliminary injunction pending further litigation.

Blum in a statement on Wednesday said his group had

"encouraged the Fearless Fund to open its grant contest to

Hispanic, Asian, Native American and white women but Fearless

has decided instead to end it entirely."

Alphonso David, a lawyer for Fearless Fund, in a statement

called the settlement agreement "very narrow," as it does not

restrict or relate to any other investment or charitable

activity by Fearless Fund going forward.

"The Fearless Fund can now continue their work toward

expanding economic opportunity," he said.