American Sustainable Business Council v. Hancock

Filing Year For Action

The federal district court for the Western District of Texas denied the Texas Attorney General and Texas Comptroller’s (State Defendants’) motion to stay pending appeal the court’s February order enjoining them from enforcing a Texas law enacted in 2021 (Senate Bill 13 (SB 13)) that prohibited State of Texas entities from investing in or contracting with companies that “boycott” fossil fuel-based energy companies. The court found that the State Defendants were unlikely to succeed on their arguments (1) that the plaintiff—American Sustainable Business Council (ASBC)—lacked standing and (2) that the court’s First Amendment analysis wrongly analyzed the law as regulating private conduct rather than as addressing the State of Texas’s role as a market participant. The court further found that the State Defendants did not demonstrate irreparable harm because their asserted harms regarding the injunction’s impacts on contracts were speculative and ASBC’s members demonstrated irreparable harm from losing the opportunity to compete for investments from Texas due to their exercise of their First Amendment rights. The court also found that the injunction of the law was in the public interest.

The federal district court for the Western District of Texas enjoined enforcement of a Texas law enacted in 2021 (Senate Bill 13 (SB 13)) that prohibited State of Texas entities from investing in or contracting with companies that “boycott” fossil fuel-based energy companies. As a threshold matter, the court ruled that the organization that challenged the law, American Sustainable Business Council (ASBC), satisfied the test for associational standing for claims against the divestment provision of SB 13 based on the standing of two ASBC members that had been blacklisted. The court found that the interests ASBC sought to protect in the lawsuit were “‘germane’ to ASBC’s mission of encouraging sustainable investing and business practices” and that ASBC members did not need to participate in the suit given that ASBC sought only prospective and injunctive relief, as opposed to individualized damages. The court also concluded that ASBC had standing for a facial First Amendment challenge to SB 13’s contracting provision. On the merits, the court ruled that SB 13 violated the First Amendment because it was “facially overbroad” since its provisions affected “a broad range of protected activities,” including “speaking about the risks posed by fossil fuels, advocating against reliance on fossil fuels, and associating with like-minded organizations.” The court further concluded that SB 13 was unconstitutionally vague in violation of the Fourteenth Amendment of the U.S. Constitution “because it fails to provide persons of ordinary intelligence a reasonable opportunity to know what conduct is prohibited and does not provide explicit standards for determining compliance with the law.”