American Sustainable Business Council v. Hegar

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.”

An organization that encourages sustainable investing and business practices filed a lawsuit in the federal district court for the Western District of Texas challenging Texas Senate Bill 13 (SB 13), a 2021 law that prohibits State entities from investing in or contracting with companies that “boycott fossil fuels.” SB 13 requires that certain State entities divest from financial companies that “boycott energy companies” and also generally prohibits governmental entities from contracting with companies for good or services unless companies confirm in writing that they do not “boycott energy companies.” The complaint alleged that implementation of SB 13 included preparation of a “blacklist” of financial companies that boycott fossil fuels and that the State Comptroller indicated that companies could be removed from the blacklist if they discontinued membership in organizations such as the Net Zero Asset Managers Initiative that advocate for addressing climate change and other sustainable practices. The organization asserted that SB 13’s divestment and procurement provisions infringe on freedom of speech and association in violation of the First Amendment and also are unconstitutionally vague in violation of the Fourteenth Amendment. In addition, the complaint asserted that the law’s provisions prohibiting lawsuits challenging the law and requiring parties that challenge the law to pay the opposing party’s attorneys’ fees and costs regardless of outcome infringed on the plaintiff’s right of access to the courts in violation of the First Amendment.