ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Monday, May 16, 2022

Texas HB 20, Contracts, and the First Amendment (Again)

5th CircuitIf you follow this blog closely, thank you!  Also, you may have noticed that I have been gathering cases in which the law of contracts intersects with the First Amendment.  The most recent such post is here (linking to earlier posts in the series).  The other three cases all made it to the Supreme Court.   Today, we visit the Fifth Circuit Court of Appeals.

Let me illustrate the situation with an analogy.  Let's say you open your house to guests so that people can come and talk to one another.  You have great snacks, flattering lighting, and an attractive ambience.  People eagerly sign your user agreement and flock to your house, so you move to a bigger venue.  More people come.  Eventually, you move to an abandoned shopping mall.  People gravitate towards groups with common interests, and they chat.  They move around the mall from venue to venue and engage in conversation.  Great snacks, flattering lighting, attractive ambience. 

Sometimes people come and shout obscenities.  You warn them.  Some spread conspiracy theories, but eventually those people find each other and leave everyone else to enjoy each other's company.  But some of those people won't let it go.  They are hostile to those who don't share their views.  They scream; they make noise.  They question your snackage.  They lobby for less flattering lighting because they're Emo.  They violate the user agreement that the signed.  They threaten to make the space uncomfortable for everyone.  So you warn them, remind them of the user agreement, specifying how they have violated it, but they double down, saying that you are "censoring" them.  After several warnings, you ban them.  They can't come to your space anymore.  

But they argue that you are infringing their First Amendment rights and that you are discriminating against them based on their politics.  There appears to be no empirical basis for such claims.  They are being banned for being obnoxious and for not abiding by the rules that they agreed to when they came to the venue.

They could go elsewhere, but your space is the best space.  The other spaces are filled with obnoxious people.  They only have Bit O'Honey and Circus Peanuts, the lighting is provided by those fluorescent tubes that buzz, and the decor consists of posters from science-fiction/fantasy movies that never got made.  Think Argo.  However, you know who else is obnoxious?  Politicians.  So the politicians pass a law forbidding you from banning obnoxious people from your space. 

You may think I'm oversimplifying a bit.  But if you replace my hypothetical abandoned shopping mall with the Internet, this is the story of Texas HB 20

Twitter-logo.svg It is styled (rather ponderously) as "AN ACT relating to censorship of or certain other interference with digital expression, including expression on social media platforms [Platforms] or through electronic mail messages."  HB 20 defines Platforms as common carriers if they have over 50 million users per calendar month.   Subchapter B of Section 2 of that Act has some notably broad disclosure requirements.  In short, Platforms (the big ones, not Parlor or Gab) must provide biannual reports to Texas detailing their use policies, their Facebook_f_logo_(2021).svgmethods for prioritizing content, and any disciplinary actions they have take against user accounts.  But it's just a disclosure requirement.  What could be wrong with that?  Don't ask me.  Ask Eric Goldman (below, left).  In his draft article, The Constitutionality of Mandating Editorial Transparency, Professor Goldman explains why the disclosure mandates that Texas and Florida are seeking to impose on Platforms are every bit as problematic as direct bans on speech.  These are state governments trying to control private websites.

Eric GoldmanAfter providing useful background on more mundane disclosure mechanisms and on the breadth of the new Texas and Florida disclosure regimes, Professor Goldman proceeds to make three substantive arguments.  First, mandatory editorial transparency regimes such as these "would be unconstitutional if imposed on traditional publishers, such as print newspapers."  Why? 

"Mandatory editorial transparency restrictions affect the substance of the published content, similar to the effects of outright speech restrictions. This indicates that the laws should be categorized as content-based restrictions and trigger strict scrutiny." 

YouTube_Logo_2017.svgSecond, the same principles should apply to Platforms.  In this part, Professor Goldman responds to five arguments found in an amicus brief filed by Columbia University's Knight First Amendment Institute.  Although the brief opposes the proposed legislation, it argues for according Platforms less constitutional protection than traditional publishers like newspapers.  Third, mandatory editorial transparency regimes facilitate illegal enforcement actions.  He illustrates this part by discussing an attempt by Texas's Attorney General Ken Paxton to retaliate against Twitter for terminating former President Donald Trump's account by opening an investigation and issuing a civil investigation demand, in which Paxton sought disclosures from Twitter similar to those that would become mandatory under HB 20.  

Instagram_logo_2016.svgIn the final section of Professor Goldman's paper, he introduces alternative mechanisms for regulating Platforms.  These alternatives would be equally effective and would not compromise First Amendment principles.  They involve third-party, non-governmental auditing of the Platforms and the empowerment of independent researchers.

Still not convinced?  Consider this article from Mark Joseph Stern on Slate.  He writes:

The intrusive disclosure requirements are almost comically impractical: They oblige companies to give Texas heaps of information about their algorithms, curation, and search functions, as well as a “biannual transparency report” with information about every single “action” taken against “content.” . . .  Platforms must also establish a complex process of notice and appeal any time it “removes content.”

It would be impossible for any target of H.B. 20 to comply with these standards. Platforms like Facebook use automated editorial tools to remove billions of posts and comments every year. They lack the resources, by orders to magnitude, to review and resolve each appeal, especially not within the 14-day limit that H.B. 20 provides. The only solution would be to stop monitoring content. Yet the law forces companies to assess complaints of “illegal content” within 48 hours, so they cannot adopt a true laissez-faire policy either.

But disclosure mandates are not the only mechanism that HB 20 provides. Subchapter D of Section 2 empowers Texas's Attorney General to enjoin any measures that a Platform undertakes to enforce its own disciplinary rules in a manner inconsistent with HB 20.  The Platform would bear the costs incurred by the AG in any enforcement proceeding.  

Neither Professor Goldman nor Mark Joseph Stern address this, but I also wonder about the intellectual property ramifications of laws like HB 20.  The laws require the Platforms to disclose information about the algorithms they use to rank content.  That strikes me as a demand to surrender proprietary information that goes to the heart of what makes these Platforms successful.

Section 6 imposes fines on the Platforms of $25,000 for each day that the Platforms "unlawfully impede" a message.  Section 7 creates a private right of action against "censorship" by Platforms.  Aware that people who inhabit the virtual space that the Platforms create agree to terms and conditions, Section 7 specifically nullifies contractual protections that the Platforms create: 

A waiver or purported waiver of the protections provided by this chapter is void as unlawful and against public policy, and a court or arbitrator may not enforce or give effect to the waiver. . . .

The waiver prohibition described by Subsection (a) is a public-policy limitation on contractual and other waivers of the highest importance and interest to this state, and this state is exercising and enforcing this limitation to the full extent permitted by the United States Constitution and Texas Constitution.

Thus the state tramples private legislation.

Any Platform that engages in "censorship" in violation of Section 7 can be subject to contempt charges.  A user may bring such an action and a court can impose contempt fines even if the law has been enjoined by another court.  

A user may bring an action under this section regardless of whether another court has enjoined the attorney general from enforcing this chapter or declared any provision of this chapter unconstitutional unless that court decision is binding on the court in which the action is brought.

Nonmutual issue preclusion and nonmutual claim preclusion are not defenses to an action brought under this section.

Judge PitmanJudge Pitman (right) of the District Court for the Western District of Texas enjoined the enforcement of HB 20 in a 30-page opinion.  Among other things, as Professor Goldman notes, Judge Pitman rejected arguments proffered by the Knight First Amendment Institute and others who argued that Platforms deserve lesser constitutional protections than traditional publishers.  Predicting the result on the merits, Judge Pitman found that: (1) Platforms exercise editorial discretion protected by the First Amendment; (2) HB 20 compels Platforms to disseminate objectionable content and impermissibly restricts their editorial discretion; (3) HB 20’s disclosure and operational requirements burden Platforms’ editorial discretion; (4) HB 20 discriminates based on content and speaker; (5) HB 20 is unconstitutionally vague; (6) Texas has alleged no interest in regulation sufficient to enable HB 20 to overcome intermediate or strict scrutiny; (7) HB 20 is so constitutionally unsound that its severability provisions cannot save it; and (8) the irreparable harm Platforms would suffer under HB 20 outweighs any harm to the state.

Last week, the Fifth Circuit lifted that injunction, in a 2-1 panel decision without opinion.   An opinion is to follow.  According to Vox, the decisions consists of one sentence: “IT IS ORDERED that the appellant’s opposed motion to stay preliminary injunction pending appeal is GRANTED.”  

The great thing about courts of law is that they provide reasoning for their decisions.  Unless and until the Fifth Circuit addresses the eight reasons given by the District Court for enjoining HB 20, the Fifth Circuit is not acting as a court of law in this case.  It is hard to imagine what the written version of this opinion will look like.  In order to overturn the injunction, the Fifth Circuit has to find that Texas has a strong likelihood of prevailing on the merits and that it will suffer irreparable injury if HB 20 is enjoined.  Under current law, neither of those things seems to be true.  SCOTUS might come along and change such matters, but the Fifth Circuit is supposed to rule based on lex lata, not lex ferenda.

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If they’re a common carrier, they can’t decide who speaks or about what. If they do, they’re a publisher but then should have the liability (e.g., libel, infringement) of a publisher. They want immunity and the ability to control the conversation. To be fair, it’s probably a good idea to put them somewhere in the middle, but finding the right mix is going to be . . . contentious. There’s a LOT of money at stake.

Posted by: Frank Snyder | May 16, 2022 4:00:42 PM

I am happy to agree with you, Frank, that the Platforms are neither common carriers nor publishers (in the sense that they do not publish their own content but create space in which other people can do so). I don't I think they are "in the middle." I think they are just something different from both common carriers and publishers.

Because they operate on the Internet and because this is commerce with, as you note, "a LOT of money at stake," this is to me an area where Congress and not the states need to regulate. Congress has done so with Section 230. If we are unhappy with that form of regulation, reforming Section 230 seems like the right place to start.

But because the issue here is whether HB 20 should be enjoined, given that the irreparable injury that HB 20 will effect is manifest, the Fifth Circuit should have left the injunction in place, at least until it can justify lifting it in a written opinion.

Posted by: Jeremy Telman | May 17, 2022 7:29:23 AM

I can address the (comparatively unimportant) point of the ponderous title of the legislation. Texas has a one-subject rule for legislative bills that is reflected in the legislative titles. In other words, the bill title must accurately reflect the single subject-matter content of the bill or else it will be ruled out of order by the parliamentarian. The plus side of this approach is that it prevents enormous omnibus pieces of legislation that few reasonably could read. The down side is that it limits some types of legislative horse trading. In any event, it's very different from what happens in the U.S. Congress!

Posted by: Mark Burge | May 17, 2022 9:41:19 AM

Thanks, Mark. Glad they didn't try to follow Congress's model with THE USA PATRIOT ACT. But it is a bit depressing that the title of the act is 50% longer than the Fifth Circuit's ruling.

Posted by: Jeremy Telman | May 17, 2022 12:47:10 PM