In a new skirmish in the volatile ESG and culture wars, a Florida federal court preliminarily enjoined enforcement of portions of Florida’s “anti-woke” law, which prohibits employers from requiring employees to attend training sessions or other activities that “espouse” or “promote” eight “concepts” relating to race, color, sex, or national origin.  U.S. District Judge Mark Walker held in Honeyfund.com, Inc. v. DeSantis (N.D. Fla. Aug. 18, 2022), that the statute is a “naked viewpoint-based regulation on speech,” in violation of the First Amendment, and also is unconstitutionally vague.

The Florida statute and the ensuing litigation illustrate the ongoing tensions between some employers’ efforts to promote diversity, equity, and inclusion (“DEI”) in the workplace and the political sensibilities of certain constituencies that claim to be offended by ESG-related measures.  The Honeyfund decision, if ultimately upheld, should provide some comfort to employers that seek to advance DEI and other ESG objectives and could help protect them against retaliatory content-based governmental actions affecting speech.

Statutory Background

In 2022, Florida enacted the Individual Freedom Act (the “IFA”), which Governor DeSantis called the “Stop Woke Act.”  The IFA amends the Florida Civil Rights Act of 1992 by expanding the definition of an unlawful employment practice to include requiring employees to attend training or other “required activity” that “espouses, promotes, advances, inculcates, or compels [employees] to believe any of” eight specified “concepts” relating to race, color, sex, or national origin.  Those “concepts” include whether members of one group are “morally superior” to members of another group, whether a person is “inherently racist, sexist, or oppressive” by virtue of his or her membership in a particular group, whether persons should be treated in a particular way because of membership in a group, whether a person “bears responsibility for, or should be discriminated against or receive adverse treatment because of” actions committed in the past, etc.

The IFA does not prohibit “discussion of the concepts listed therein as part of a course of training or instruction” if such “training or instruction is given in an objective manner without endorsement of the concepts.”

Factual Background

Several plaintiffs challenged the IFA under the First Amendment to the U.S. Constitution.  Some plaintiffs are employers who wish to conduct mandatory DEI training sessions that they are concerned are now prohibited by the IFA.  Another plaintiff is a DEI consultant who provides such training and who claims to have lost business because of the IFA.

Plaintiffs alleged that the IFA violates the First Amendment because it seeks to regulate speech based on content and viewpoint and cannot withstand strict scrutiny.  They also claimed that the statute – including its carve-out for “objective” training – is unconstitutionally vague.  Judge Walker agreed and granted a preliminary injunction, holding that plaintiffs are likely to succeed on the merits and that the other criteria for granting preliminary injunctive relief also tip in their favor.

The Court’s Decision

The court began with the principle that, under the First Amendment, “[t]he State may not burden the speech of others in order to tilt public debate in a preferred direction.”  The IFA, however, does just that.  It “does not ban all mandatory employee trainings,” or even “mandatory trainings addressing certain concepts.”  Rather, the state prohibits only “trainings that endorse the covered concepts.”  “[T]he only way to determine whether the IFA bars a mandatory activity is to look to the viewpoint expressed at that activity – to look at speech.”

Accordingly, because it discriminates based on the content of the regulated speech, the statute is presumptively unconstitutional unless it can survive strict scrutiny, which requires the government to prove that the law is “narrowly tailored to serve compelling state interests.”  The court ruled that the IFA could not survive strict-scrutiny review.

  • The court did not find a compelling state interest, in that “[t]he First Amendment does not give the state license to censor speech because it finds it ‘repugnant,’ no matter how captive the audience” of employee trainees might be.
  • The court also held that, even if one assumes the IFA serves a compelling governmental interest such as prohibiting discrimination, the Florida Civil Rights Act “already prohibited much of what Defendants claim the IFA aims to prohibit.”  “For example, a diversity and inclusion training could be so offensive, and so hostile to White employees, that it could create a hostile work environment.  That is already illegal – as both parties acknowledge.”

In addition to concluding that plaintiffs would likely be able to succeed on their claim that the IFA violates the First Amendment, the court agreed that the statute is impermissibly vague.  The court viewed at least some of the eight prohibited “concepts” as “mired in obscurity” or even “bordering on unintelligible.”  Moreover, “the entire statute was rendered vague by the qualifier that ‘discussion’ of the prohibited concepts is permissible if ‘given in an objective manner without endorsement.’”  “[F]ew terms are as loaded and contested as ‘objective,’” and “objective discussion, if attainable, is even more difficult with respect to controversial matters like the eight prohibited concepts here, where many, including Defendants, question their legitimacy.”

The court therefore preliminarily enjoined enforcement of the statute.

Implications

DEI and other ESG issues have become political hot potatoes in recent years.  On the one hand, investors (especially some prominent institutional investors), employees, customers, and other corporate stakeholders are demanding that companies take steps to promote ESG-related considerations such as environmental impact, employee welfare, DEI, and effects on communities at large.  Some advocates of that position believe that promoting ESG concerns is the “right” thing to do for society at large; others believe that doing so is necessary to enhance corporate growth and sustainability and to protect corporations from the risks that could arise from ignoring ESG considerations.  On the other hand, however, other constituencies have expressed hostility to ESG concerns and have sought to punish companies that promote them.  Some governmental entities have tried to retaliate against companies that have engaged in what they derogatorily term “woke” speech or activities.

The Honeyfund decision illustrates the extent to which the First Amendment might prohibit such retaliatory measures and allowcompanies to pursue ESG-related speech in which they wish to engage.  The decision’s reasoning, if upheld and if accepted by other courts, might shield employers and other companies from (for example) legislation seeking to punish or discourage efforts to endorse the use of alternative energy sources instead of fossil fuels, or to take positions on guns, reproductive rights, and DEI issues.

But while the First Amendment can be an important shield, its use is hardly cost-free.  Apart from the financial expenses of litigating a First Amendment challenge, a suit seeking to void a statute as unconstitutional pits the litigant against the government in a politically charged context.  Some (perhaps many) corporations might not be willing to engage in such warfare, especially where the government has the power to regulate some of the company’s activities.

Moreover, the First Amendment does not necessarily protect conduct, as opposed to speech.  If regulation of ESG-related conduct can be separated from regulation of ESG-related speech, other questions will arise about whether the First Amendment can shield an actor from governmental measures.

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Photo of Jonathan Richman Jonathan Richman

Jonathan Richman represents a variety of companies in securities class actions, shareholder derivative actions, internal investigations, SEC investigations, corporate governance, insider trading, D&O insurance and related matters. Many of those matters involve international elements, including representations of non-U.S. issuers in U.S. litigation and…

Jonathan Richman represents a variety of companies in securities class actions, shareholder derivative actions, internal investigations, SEC investigations, corporate governance, insider trading, D&O insurance and related matters. Many of those matters involve international elements, including representations of non-U.S. issuers in U.S. litigation and in landmark non-U.S. collective settlements under Dutch law in the Netherlands. Jonathan’s clients have included Hewlett Packard, Royal Dutch/Shell, Zurich Insurance Group, Halliburton, Waste Management, and Bed Bath & Beyond.

Jonathan writes extensively on topics ranging from securities and insider-trading law, corporate governance and fiduciary issues to non-U.S. law on collective actions. His articles have been published in major legal publications.

Jonathan is the past co-head of the Firm’s Securities Litigation Group.

Class Action and SEC Enforcement Experience

  • Royal Dutch/Shell
  • Global Crossing
  • Waste Management
  • Zurich Insurance Group
  • Vestas Wind Systems A/S (class action only)
  • JBS S.A. (class action only)
  • Henry Schein, Inc. (class action only)
  • YRC Worldwide Inc. (class action only)
  • Bed Bath & Beyond Inc. (class action only)
  • Roka Bioscience, Inc. (class action only)
  • Fifth Street (class action only)
  • Vida Longevity Fund (class action only)
  • Former CEO of Lumber Liquidators (class action only)
  • Individual defendant in Third Avenue securities class actions
  • American General (class action only)
  • Metropolitan Life (class action only)
  • New York Life (class action only)
  • Leucadia/Jefferies merger litigation (class action only)
  • Realty Income/American Realty merger litigation (class action only)
  • ARCP/ARCT III merger litigation (class action only)
  • Aberdeen/Artio merger litigation (class action only)
  • PhotoMedex/LCA-Vision merger litigation (class action only)
  • RCS Capital/Summit Financial merger litigation (class action only)
  • First American/First Advantage merger litigation (class action only)
  • SEC inquiry involving CMBS servicing
  • SEC inquiry involving issuer’s confidentiality notice for internal investigations
  • Various SEC, CFTC, and FINRA inquiries involving trading issues

Shareholder Derivative Litigation

  • Hewlett-Packard
  • Royal Dutch/Shell
  • Brocade Communications Systems, Inc.
  • Halliburton Company
  • Waste Management, Inc.
  • Henry Schein, Inc.
  • YRC Worldwide Inc.
  • Bed Bath & Beyond Inc.
  • Fifth Street
  • Vida Longevity Fund
  • Former CEO of Lumber Liquidators
  • Individual defendant in Third Avenue derivative litigation

Department of Justice Proceedings

  • Royal Dutch/Shell
  • Global Crossing
  • Property and casualty insurers

Miscellaneous

  • Advising outside directors of for-profit educational institution on litigation and regulatory investigations
  • Providing advice and training sessions for clients on insider-trading issues
  • Representing Financial Oversight and Management Board for Puerto Rico in pending litigation arising from Puerto Rico bankruptcy

Publications

  • Author, “Court Preliminarily Enjoins Florida’s ‘Stop Woke Act,’” National Law Review (Aug. 22, 2022)
  • Author, “Blockchain Meets Morrison:  Court Rejects Blockchain Class Settlement Because of Concerns About Adequacy of Representation,” National Law Review (Aug. 16, 2022)
  • Author, “Delaware Supreme Court Allows Use of ‘Reliable’ Hearsay to Support Books-and-Records Demand,” National Law Review (July 20, 2022)
  • Author, “Divided Delaware Supreme Court Decision Highlights Issues About Director Independence in Derivative Actions,” National Law Review (June 30, 2022)
  • Author, “Second Circuit Reverses Dismissal of Securities Claim Alleging Failure to Disclose SEC Investigation,” National Law Review (May 25, 2022)
  • Author, “Ninth Circuit Upholds Delaware-Forum Bylaw That Precludes Assertion of Federal Proxy Claim,” National Law Review (May 13, 2022)
  • Co-author, “SEC Defeats Motion to Dismiss Insider Trading Complaint Alleging Novel ‘Shadow Trading’ Theory, The Corporate Lawyer, vol. 59, no. 3 (Feb. 2022), at 1
  • Co-author, “Seventh Circuit Reverses Dismissal of Derivative Action Based on Forum Clause as Applied to Federal Claim,” National Law Review (Jan. 21, 2022)
  • Author, “California Federal Court Holds U.S. Securities Laws Inapplicable to Unsponsored, Unlisted ADR Transaction Preceded by Purchase of Common Stock Outside the U.S.,” National Law Review (Jan. 10, 2022)
  • Co-author, “SEC Pursues ‘Shadow Trading’ Insider Trading Case,” Corporate Governance Advisor, vo. 29, no. 6 (Nov./Dec. 2021), at 29
  • Co-author, “SEC Investor Advisory Committee Considers Recommendations to Tighten Rules for Insiders’ Trading Plans,” National Law Review (Sept. 7, 2021)
  • Author, “Second Circuit Holds that Accurately Reported Financial Statements Are Not Actionable and that Materiality Has a Half-Life,” National Law Review (Aug. 27, 2021)
  • Author, “First Circuit Adopts Prevailing Standard for Applicability of Federal Securities Laws to Foreign Investors, But Rejects Second Circuit’s Narrower Test,” National Law Review (May 11, 2021)
  • Author, “Second Circuit Upholds Insider Trading Conviction, Finding Sufficient Confidentiality Duty and Personal Benefit,” National Law Review (Apr. 7, 2021)
  • Co-author, “Second Circuit Reaffirms that Federal Securities Laws Do Not Apply to Predominantly Foreign Transactions,” National Law Review (Jan. 26, 2021)
  • Author, “Corporate Scienter Requires Link Between Employees with Knowledge and the Alleged Misstatements,” National Law Review (May 26, 2020)
  • Author, “Delaware Supreme Court Rules that Corporate Charters Can Require Litigation of Federal Securities Act Claims in Federal Court,” National Law Review (Mar. 18, 2020)
  • Author, “California Federal Court Holds that U.S. Securities Laws Apply to Unsponsored, Unlisted ADRs,” National Law Review (Jan. 30, 2020)
  • Author, “Second Circuit Holds that a ‘Personal Benefit’ Is Not Required for Insider Trading Under Criminal Securities Statute,” National Law Review (Jan. 2, 2020)
  • Co-author, “When Passive Investors Drift into Activist Status,” CCR Corp. Deal Lawyers (Nov.-Dec. 2019)
  • Author, “Delaware Supreme Court Rejects Presumption of Confidentiality for Books-and-Records Productions,” National Law Review (Aug. 8, 2019)
  • Author, “Supreme Court Raises Questions About Private Rights of Action Under § 14 of Securities Exchange Act,” National Law Review (Apr. 24, 2019)
  • Author, “Second Circuit Rejects Securities Claims Based on Generic Statements About Ethics and Compliance,” Securities Reform Act Litigation Reporter, vol. 47, no. 1 (April 2019), at 54
  • Author,” Supreme Court Holds that Persons Who Do Not ‘Make’ Misstatements Can Nevertheless Be Liable for Other Securities-Fraud Violations,” National Law Review (Mar. 29, 2019)
  • Author, “The importance of documenting corporate actions: Delaware Supreme Court requires production of emails in books-and-records request,” Westlaw Journal Mergers & Acquisitions (Feb. 2019)
  • Author, “First Appellate Decision Holds that SEC Can Bring Extraterritorial Enforcement Action Based on Conduct or Effects in United States,” National Law Review (Jan. 24, 2019)
  • Author, “Insider Trading for Dummies: Judge Rakoff Tries to Simplify the Law,” National Law Review (Dec. 10, 2018)
  • Co-author, “Fortis Case Confirms Viability of Dutch Settlement Law,” Law360 (July 27, 2018) (with Professor Ianika Tzankova)
  • Author, “Second Circuit Again Holds That Tipper/Tippee Liability Can Arise from a Gift of Inside Information Even Without a Close Personal Relationship,” National Law Review (June 29, 2018)
  • Author, “Supreme Court Rules That Federal Courts Are Not Bound to Give Conclusive Effect to Foreign Governments’ Statements About Their Laws,” National Law Review (June 14, 2018)
  • Author, “Supreme Court Prohibits Stacking of Successive Class Actions Beyond Limitations Period,” National Law Review (June 14, 2018)
  • Author, “Supreme Court Rules That State Courts Can Adjudicate Class Actions Under the Securities Act of 1933,” Securities Arbitration Commentator (April 11, 2018)
  • Author, “Fourth Circuit Upholds Disclosure of Government Subpoena as Evidence of Loss Causation,” National Law Review (Feb. 24, 2018)
  • Author, “Revisiting Preclusion Principles in Derivative Actions,” Law360 (July 28, 2017)
  • Author, “Second Circuit Requires Increased Scrutiny of Securities Class Actions Involving Off-Exchange Transactions,” National Law Review (July 8, 2017)
  • Author, “Dutch Court Denies Approval of Collective Settlement Unless Changes Are Made as to Allocation of Compensation and Fees,” National Law Review (June 19, 2017)
  • Author, “Utah Court Bites Bullet with Dodd-Frank Jurisdiction Ruling,” Law360 (Apr. 13, 2017)
  • Author, “Non-Use Agreement Need Not Precede Disclosure of Confidential Information,” National Law Review (March 21, 2017)
  • Author, “Watch the Napkin: First Circuit Affirms Insider-Trading Conviction,” National Law Review (Feb. 28, 2017)
  • Author, “Dueling Shareholder Class Actions Could Raise Due Process Issues,” Law360 (Jan. 30, 2017)
  • Author, “Supreme Court Reaffirms Personal-Benefit Requirement for Insider Trading,” WestLaw Journal: Securities Litigation & Regulation and WestLaw Journal: White-Collar Crime (Dec. 22, 2016)
  • Author, “Rakoff Addresses Tippee Liability in SEC v. Payton,” Law360 (Dec. 2, 2016)
  • Author, “Dutch Collective Actions vs. Collective Settlements,” National Law Review (Oct. 18, 2016)
  • Author, “Judgment Recognition and the Reach of US Securities Laws,” Law360 (Oct. 3, 2016)
  • Author, “Executives Face SOX Disgorgement Uncertainty After Jensen,” Law360 (Sept. 8, 2016)
  • Author, “Wine, Steak and a Taste of the ‘Personal Benefit’ Tension,” Law360 (June 6, 2016)
  • Author, “Proskauer Explains Supreme Court’s Clarification of Jurisdiction Under Securities Exchange Act,” The CLS Blue Sky Blog (May 24, 2016)
  • Author, “Second Circuit Reinforces Liability Standard in Securities Cases Based on Statements of Opinion,” Business Law Today (Mar. 2016)
  • Author, “The Netherlands Returns as a Collective Settlement Forum,” Law360 (Mar. 15, 2016)
  • Author, “How Morrison v. Australia Bank Was Applied in Petrobras,” Law360 (Feb. 16, 2016)
  • Author, “New York Court Certifies Classes in Petrobras Securities Litigation,” National Law Review (Feb. 3, 2016)
  • Author, “Delaware Court of Chancery Rejects Another Disclosure-Only M&A Settlement and Warns of ‘Increasingly Vigilant’ Scrutiny,” National Law Review (Jan. 25, 2016)
  • Author, “What To Expect from High Court’s New Insider Trading Case,” Law360 (Jan. 19, 2016)
  • Author, “Second Circuit Upholds Common-Interest Privilege for Borrower’s Sharing of Legal Advice with Consortium of Lenders,” Transaction Advisors (Dec. 2015)
  • Author, “What Jarkesy Means for SEC Admin Court Challenges,” Law360 (Sept. 30, 2015)
  • Author, “A Farewell to Alms? Peppercorn Settlements of M&A Litigation,” National Law Review (Sept. 21, 2015)
  • Author, “Seventh Circuit Rejects Court Challenge to Pending SEC Administrative Proceeding,” com (Aug. 27, 2015)
  • Author, “9th Circuit Rebuffs Newman,” Law360 (July 8, 2015)
  • Author, “Proskauer Discusses Supreme Court’s Omnicare Decision, Clarifying Liability for Statements of Opinion in Registration Statements,” The CLS Blue Sky Blog (Mar. 24, 2015)
  • Author, “U.S. Appeals Court Rejects Bright-Line Test for Extraterritorial Reach of U.S. Securities Laws,” Bloomberg BNA World Securities Law Report, vol. 20, no. 9 (Sept. 2014)
  • Author, “Whistleblower Anti-Retaliation Provision Does Not Apply Outside the U.S.,” Westlaw Journal Securities Litigation & Regulation, vol. 20, issue 9 (Sept. 4, 2014)
  • Author, “So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?,” Harvard Law School Forum on Corporate Governance and Financial Regulation (Sept. 2, 2014)
  • Co-author, “Defending Directors: Cram Sheet,” Wolters Kluwer Law & Business (October 23, 2012)
  • Author, “Delaware Chancery Court Issues Decision on Collateral Estoppel in Derivative Suits,” Westlaw Journal Delaware Corporate, vol. 26, issue 25 (June 25, 2012)
  • Author, “SEC Issues Report on Extraterritorial Reach of U.S. Securities Laws,” VCExperts on-line publication (June 2012)
  • Co-author, “Fraud? Foreign Purchase? Forget It! ‘Foreign-Cubed’ and Other Foreign-Issuer Cases After Morrison,” of Secs. & Commodities Reg., vol. 44, no. 4 (Feb. 23, 2011)
  • Author, “Supreme Court Clarifies Statute of Limitations in Securities-Fraud Actions,” Derivatives Financial Prods. Rpt., 11, no. 10, at 23 (June 2010)
  • Author, “Transnational Class Actions and Judgment Recognition,” Class Action Litigation Report (June 25, 2010)
  • Co-author, “Pushing the Limits of U.S. Securities Laws: ‘Foreign-Cubed’ (‘F-Cubed’) Cases,” 42 SRLR 10 (March 8, 2010)
  • Co-author, “Assignees Have Discovery Obligations When Asserting Assignors’ Claims,” Journal of Payment Systems Law (June/July 2005)
  • “Punitive Damages: Past, Present and Future,” International Commercial Litigation (July/August 1995)
  • Co-author and editor, Takeovers: Attack and Survival (1987)
  • Co-author, “New Life for State Takeover Statutes?,” New York Law Journal (July 27, 1987)
  • Co-author, “Damages in Defamation Actions,” Damages in Tort Actions (1985)
  • “Facial Adjudication of Disciplinary Provisions in Union Constitutions,” Yale Law Journal (1981)

Presentations

  • Practising Law Institute: “ESG 2022: What It Means for Boards, Management, and Counsel” (June 1, 2022) (full-day program; program co-chair and panel chair)
  • Practising Law Institute: “ESG 2021: What It Means for Boards, Management, and Counsel” (webcast, June 24, 2021) (full-day program; program co-chair and panel chair)
  • Practising Law Institute: “ESG 2020: What It Means for Boards, Management, and Counsel) (webcast, July 24, 2020) (full-day program; program co-chair and panel chair)
  • Practising Law Institute: “ESG and Promoting Corporate Sustainability” (New York, June 25, 2019) (full-day program; program chair and panel chair)
  • The Mason Judicial Education Program, Symposium for Judges: Securities Class Action Litigation (Arlington, VA, May 5, 2019)
  • The Mason Judicial Education Program, Symposium for Judges: The Economics of Corporate & Securities Law (San Diego, April 12-14, 2018)
  • ABA Section of Litigation: “Recent Developments in Securities Class Actions” (webinar, May 11, 2017)
  • Professional Liability Underwriters Society D&O Symposium: “Behaving Badly: The Non-U.S. Corporate Scandal Wave” (New York, February 9, 2017)
  • New York State Bar Association International Section: “Hot Topics in Cross-Border Securities Litigation” (São Paulo, October 16, 2015)
  • Proskauer Hedge-Fund Breakfast Seminar on Insider Trading (New York, Feb. 5, 2015)
  • CLE International’s 9th Annual Class Action Conference: “Collective Proceedings Abroad: Evolving Approaches & Attitudes” (Washington, D.C., October 2013)
  • Practising Law Institute: “Handling a Securities Case: From Investigation to Trial and Everything in Between” (New York, April 2012)
  • Institutional Investor Educational Foundation: Corporate Governance Roundtable Forum (New York, December 2011)
  • Institutional Investor Educational Foundation Amsterdam Roundtable: “The Netherlands and the Future of European Securities Litigation” (The Hague, September 2011)
  • Summer Institute on Law & Government, American Univ. Washington College of Law: “Securities Class Actions – An Update” (Washington, D.C., June 2010)
  • ABA Section on Litigation Annual Conference: “Global Class Actions: Lasting Peace or Ticking Time Bombs?” (New York, April 2010)