Back in February, a federal judge in Texas found that the state’s anti-ESG investing law, SB-13, violated the First and Fourteenth Amendments. The trial court enjoined the law, stopping Texas from enforcing it. Now that injunction has been overturned. A three-judge panel for the Fifth Circuit Court of Appeals issued a ruling reversing the trial court’s decision. The panel writes that a state restricting commerce in this way is not a First Amendment violation:
“S.B. 13 is about spending, not speech. The Constitution permits—and citizens expect—government agencies to care about how public funds are used. State officials have the right to champion nondiscrimination by refusing to engage with those who discriminate. They’re allowed to boycott those who boycott others.
So Texas may refuse to invest in private funds that discriminate. And that does not prevent the funds from expressing their viewpoints in any way. S.B. 13 only regulates conduct, in the form of investment decisions. And investment decisions are not inherently expressive.”
The panel failed to consider the Fourteenth Amendment arguments advanced by the trial court. The Fifth Circuit’s order appears to only stay the injunction placed on SB-13 pending appeal. Litigation will remain ongoing. The outcome of the case is likely to be appealed regardless of which party prevails.
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