Nonprofit’s Diversity Scholarship Program Challenged in Federal Court

The lawsuit is consistent with the ongoing opposition to diversity, equity, and inclusion (DEI) efforts across sectors, and its outcome could impact how other nonprofit organizations structure and implement their scholarships programs.

Do No Harm v. ACS

Do No Harm’s complaint alleges that the ACS Scholars Program awards scholarships to undergraduate students from “historically underrepresented groups” in chemical sciences.[1] To be eligible for the scholarship, the complaint states that students must be a US citizen or permanent resident, be a full-time college student or graduating high school senior, demonstrate high academic achievement, major in chemistry or a chemistry-related discipline, and intend to pursue careers in chemical sciences.[2] The complaint alleges that eligible students must also “identify as African American, Hispanic, or American Indian, or those who identify as multi-ethnic including one of those identities.”[3]

In the complaint, Do No Harm describes itself as “a nationwide membership organization of healthcare professionals, students, patients, and policymakers who want to protect healthcare from radical, divisive, and discriminatory ideologies.”[4] Do No Harm filed the lawsuit in federal district court in Washington, DC, on behalf of “at least one member who tried to apply for the ACS Scholars Program in 2025, is ready and able to apply again, and would apply for the next open cycle after a court orders [ACS] to stop considering race.”[5] The complaint states that Do No Harm’s member met all the nonracial eligibility criteria for the ACS Scholars Program, applied for the scholarship, disclosed her racial and ethnic background, and was informed by ACS that she was “ineligible” to apply.[6]

Do No Harm is seeking a declaratory judgment that the ACS Scholars Program violates Section 1981 and Title VI, along with a permanent injunction barring ACS from considering an applicant’s race in scholarship selection. The complaint also alleges nominal damages of $1 and reasonable costs and expenses for the lawsuit.

Section 1981 Claim

Section 1981 of the Civil Rights Act of 1866 prohibits racial discrimination in contracts. Do No Harm alleges that the ACS Scholars Program involves contractual relationships because applicants are required to create an account on ACS’s website and agree to its Terms of Use and Privacy Policy to access the scholarship application.[7] Scholarship recipients must also agree to ACS’s rules and regulations upon accepting scholarship funds.[8] Do No Harm contends that ACS violates Section 1981 by “intentionally limiting the formation of contractual relationships and by offering differing contractual terms based on race and ethnicity.”[9]

Title VI Claim

Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, or national origin in programs and activities receiving federal financial assistance. Do No Harm alleges that ACS is subject to Title VI because it receives “federal financial assistance” as a 501(c)(3) organization that accepts charitable contributions.[10] Do No Harm claims that accepting charitable contributions and providing a charitable contribution deduction constitutes “federal financial assistance” within the meaning of Title VI.[11]

The complaint also contends ACS’s tax-exempt status and charitable contribution deductions render the ACS Scholars Program a federal program or activity for purposes of Title VI. The complaint states that tax-exempt organizations under Section 501(c)(3) “must not violate fundamental public policy by engaging in racial discrimination”[12] and asserts that excluding white and Asian applicants from the ACS Scholars Program constitutes racial discrimination that is “uncharitable and violates fundamental public policy.”[13]

Do No Harm also makes references to the Administration’s recent executive order targeting DEI-related initiatives, stating that “[e]specially in 2025, federal contractors should know that their ‘contracting parties’ cannot ‘consider race’ in ‘ways that violate the Nation’s civil rights laws.’”[14]

Implications for Nonprofit Organizations

The lawsuit is part of a series of legal challenges by private parties against nonprofit organizations asserting that certain grants and programs use prohibited race-based criteria. Do No Harm and other organizations have initiated similar actions targeting DEI-related initiatives across various sectors. Many of these lawsuits have been resolved through settlements rather than court decisions based on their merits.

For example, in 2023 the nonprofit membership organization American Alliance for Equal Rights (AAER) filed a lawsuit against Fearless Foundation, a 501(c)(3) organization, alleging that a grant program run by Fearless Foundation violated Section 1981. The grant program awarded grants to Black women-owned small businesses. AAER alleged that the grant program created a contractual relationship between Fearless Foundation and grant applicants and that the restriction of eligibility to businesses owned by Black women violated Section 1981. After the 11th Circuit Court of Appeals ruled that AAER had standing to sue and upheld the injunction in the case, the parties agreed to settle, and Fearless Foundation agreed to close the existing grant program.[15] 

Other organizations have faced scrutiny for internship or fellowship programs targeted exclusively towards historically underrepresented groups, under the theory that such programs violate Title VII, the federal law that prohibits discrimination in employment.

ArentFox Schiff is monitoring developments in this case along with other DEI developments in the nonprofit sector. If your organization has questions, please contact your relationship attorney at AFS or one of the authors of this alert.