In 1865, the state of Mississippi passed a law allowing police to arrest and forcibly transport “any freedman, free negro, or mulatto” back to their employer if they failed to provide a satisfactory reason for quitting their jobs. The law was part of a slate of laws, known as “Black Codes,” passed in Southern states in the immediate aftermath of the Civil War that effectively sought to perpetuate slavery in all but name.
These codes were a key impetus for the Civil Rights Act of 1866 and a specific provision, codified today as Section 1981, that states in part: “All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens.”
Today, this same law is being weaponized to try to eliminate programs that provide scholarships and other opportunities not just for African Americans, but also other groups that have faced discriminatory laws and practices.
The latest—and potentially most consequential—case is a lawsuit filed in December 2025 against the Hispanic Scholarship Fund (HSF). The group, founded in 1975, is being sued in the US District Court for Washington, DC, by the American Alliance for Equal Rights (AAER). AAER’s founder, Edward Blum, also spearheaded the case against Harvard University that culminated in the 2023 Supreme Court decision in Students for Fair Admissions v. Harvard, effectively barring affirmative action policies in college admissions.
[Section 1981] is being weaponized to try to eliminate programs that provide…opportunities not just for African Americans, but other groups that have faced discriminatory laws and practices.
“Cases like this aim to turn civil rights protections upside down, and using them doesn’t advance equality, it re-entrenches inequality,” Sabrina Talukder, senior counsel with the Lawyers’ Committee for Civil Rights Under Law, told NPQ. “It cuts against the purpose of these historic statutes that are meant to dispel the ‘badges and incidents of slavery,’ the very reasons for why they were enacted.”
The Lawyers’ Committee has been joined by the Council on Foundations (CoF) and other nonprofit and legal advocacy groups in submitting amicus briefs supporting HSF in the case. While the lawsuit against HSF can be seen as part of a larger anti-diversity agenda in recent years, championed both by conservative groups and the Trump administration, it also stands out for its potentially sweeping implications.
Beyond the First Amendment right of nonprofits and charities to advocate for causes they believe in, there is a long tradition in the United States of organizations and advocacy groups supporting immigrants and others who have faced, at various times in history, indifference or hostility from the government and other authorities. In this sense, HSF follows in a long line that includes groups like the Irish Charitable Society, the Hebrew Immigrant Aid Society, and the United Negro College Fund.
A Novel and Potentially Troubling Legal Theory
At the core of AAER’s lawsuit is the claim that by offering scholarships to help Hispanic students with financial need pay college tuition and expenses, HSF is providing charity while entering a contractual relationship with its applicants.
“In exchange for a shot at those scholarships, contestants must license away their name, image, and likeness; hand over their personal data; agree to a class-action waiver; and more,” AAER stated in the lawsuit.
By restricting eligibility to people with Hispanic ancestry, the group argues that HSF is violating Section 1981. This argument could have broad implications in the age of the internet, Ben McDearmon, the director of Legal Resources at CoF, noted in an interview with NPQ.
“The idea that merely interacting with an organization on its website and having to agree to its privacy policies—does that mean every single thing you do with that organization beyond that point is inevitably governed by the law of contracts?” McDearmon said, questioning the validity of AAER’s claim.
Regardless of a lawsuit’s legal merits, fighting one can be costly for nonprofits with limited resources, especially in a climate of political hostility and intimidation. In a case with strong parallels to the HSF lawsuit, AAER sued the Fearless Fund and Fearless Foundation in 2023 over a grant program to small businesses owned by Black women, claiming that it discriminated against non-Black candidates. A similar coalition of legal and nonprofit groups, including CoF, lined up behind the Fearless Foundation, but the group settled in 2024 and agreed to end the program.
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Meanwhile, the strategy to leverage Section 1981 against minority-oriented programs appears to be gaining traction. A database maintained by the Meltzer Center for Diversity, Inclusion, and Belonging shows that more than 30 such cases have been filed since December 2024.
Given the recent tide, McDearmon says it’s important for the nonprofit sector to take a stand on the HSF case.
“We’ve seen a chilling effect certainly in the last couple of years, but I think this could even further shut down a lot of organizations that are looking to advance racial equity work, looking to remedy past harms,” he said. “This [case] would say you can’t really consider [race] at all in any program or you run the risk that at some point along the way that you entered into a contract with this party.”
A Unique Legacy of Discrimination
After a hearing in mid-February, the judge in the HSF case is now weighing the organization’s motion to dismiss the suit. While the case could end up turning on technical considerations, such as whether AAER has standing to challenge the program, it has brought to the surface a long history of institutional discrimination the Latine community has faced in the United States.
In its amicus brief, the Lawyers’ Committee laid out the spate of federal and state policies that have collectively been termed “Juan Crow.”
“Zoning laws in the early 1900s in heavily Hispanic populated areas, particularly Texas and California, were explicitly used to institutionalize the segregation of Mexican-American communities into poorly equipped schools,” the brief reads.
By 1940, the brief continues, more than 80 percent of “Mexican-American students in California attended ‘Mexican-only schools.’” In this period, Texas’s state constitution required separate schools for Black students, a segregation that was also applied to Mexican American students. By 1956, the brief notes, 80 percent of school districts in Texas were segregated.
“It’s [persistent patterns] of discrimination that these laws and these efforts are designed to resolve.”
President Lyndon Johnson witnessed the poverty and discrimination faced by Mexican American students firsthand in the 1920s when he was teaching in rural Texas. He cited the experience in leading the push for the Civil Rights Act of 1964. This history of institutionalized discrimination is likely reflected in ongoing disparities between White and Latine people. As the Lawyers’ Committee noted, “Hispanic families currently have one of the highest workforce participation rates, but they are more likely to live in poverty, have lower median incomes, and have lower wealth compared to their White peers.”
The advocacy group UnidosUS has found that barely over half (52 percent) of Latine students manage to complete degrees in four years, compared to 65 percent of White students. With comparatively limited family wealth and savings, many Latine students must work to put themselves through college: 80 percent reported working while in college, according to the UnidosUS survey.
Eric Rodriguez, the senior vice president of policy and advocacy at UnidosUS, told NPQ that these persistent patterns are part of the reason why the Hispanic Scholarship Fund exists.
“It’s that legacy of discrimination that these laws and these efforts are designed to resolve,” he said. “In this particular case, they’re trying to address a couple of things, most especially the economic barriers that Latino students face in accessing higher education and completing higher education, which is a major challenge for Latino students across the country.”
