The U.S. Court of Appeals for the Eleventh Circuit held that a contest providing venture-capital funding only to Black female applicants is substantially likely to violate section 1981 of the Civil Rights Act of 1866, which prohibits race discrimination in the making of contracts.  The 2-1 split decision in American Alliance for Equal Rights v. Fearless Fund Management, LLC (No. 23-13138, June 3, 2024) held that an organization devoted to “ending racial classifications and racial preferences in America” was substantially likely to prevail on its § 1981 claim to enjoin the restricted contest, and it remanded the case for entry of a preliminary injunction.

A federal District Court in Ohio recently ruled that a white litigant did not have standing to assert a discrimination claim against a contest that had provided grants to Black-owned businesses.  The decision in Roberts v. Progressive Preferred Insurance Co. (N.D. Ohio May 21, 2024) held that the plaintiff lacked standing to seek retrospective relief under § 1981 of the Civil Rights Act because he had not alleged he would have received a grant had he been able to apply for one.  He also lacked standing to seek prospective relief because the defendants had dropped the race-based eligibility criteria from the following year’s grant program.

The U.S. Court of Appeals for the Eleventh Circuit affirmed an injunction against 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. The unanimous decision in Honeyfund.com, Inc. v. Governor, State of Florida (11th Cir. Mar. 4, 2024) held that the Florida statute draws “distinctions based on viewpoint – the most pernicious forms of dividing lines under the First Amendment” – and cannot be sustained as an “attempt to control speech by recharacterizing it as conduct.”

A federal district court in Missouri recently denied a motion to dismiss the Securities Industry and Financial Markets Association’s (“SIFMA’s”) challenge to Missouri Securities Division rules that require financial firms and professionals to obtain clients’ signatures on state-prescribed documents before providing advice that “incorporates a social or nonfinancial objective.” The decision – Securities Industry and Financial Markets Association v. Ashcroft – upholds a noteworthy response from the securities industry to the anti-ESG backlash that has emerged in the past few years and has politicized investment decisionmaking.

A federal District Court in Washington recently dismissed a shareholder derivative action by a conservative advocacy group challenging Starbucks’ initiatives relating to diversity, equity, and inclusion (“DEI”). The decision in National Center for Public Policy Research v. Schultz held that the plaintiff did not fairly and adequately represent the interests of Starbucks and its shareholders in launching the challenge and had not pled particularized facts showing that Starbucks’ Board of Directors had wrongfully refused the plaintiff’s demand to dismantle the company’s DEI initiatives.

In an era of politicization of DEI and other ESG-related concerns, the ruling sends a signal that at least some courts will refuse to become “political attachés” in the culture wars and will not involve themselves with partisan attacks on “reasonable and legal decisions made by the board of directors of public corporations.” Decisions of this type should provide some comfort to corporations and boards as they consider how to address those complicated social and workplace issues.

A California federal court held that a California statute requiring California-based corporations to have a minimum number of directors from designated under-represented groups violates the federal Constitution’s Equal Protection Clause. The decision in Alliance for Fair Board Recruitment v. Weber (E.D. Cal. May 16, 2023) is one of the latest skirmishes in the culture wars raging around diversity and other ESG-related matters. The ruling addresses the same law that a California state court previously invalidated in a decision that is currently on appeal.

Walt Disney Parks and Resorts U.S., Inc. (“Disney”), the owner and operator of the Walt Disney World Resort in Florida, has sued Florida’s Governor and other officials for allegedly launching “a targeted campaign of government retaliation” in response to Disney’s opposition to Florida’s so-called “Don’t Say Gay” law.  The Complaint in Walt Disney Parks and Resorts U.S., Inc. v. DeSantis et al., highlights one of the most hotly debated topics in the era of competing ESG and anti-ESG sentiments:  to what extent should corporations take public positions on political and social issues that might not directly relate to the companies’ core business operations? Corporate boards of directors should be attuned to and exercise appropriate oversight over these questions, as well as the related issue of corporate political contributions.

SEC Division of Enforcement Director Gurbir Grewal and several high-ranking officials from the U.S. Attorney’s Offices for the Southern and Eastern Districts of New York and the FBI spoke on November 29, 2022 at a conference sponsored by Sandpiper Partners LLC concerning hot topics in SEC and DOJ enforcement.  The panelists all made clear that the views they expressed were their own, but those views are worth hearing.