Red States Reject Attempt to Move ESG Case From Unfriendly Court

Republican attorneys general suing the US Labor Department over its socially conscious retirement investing rule in a Texas federal court pushed back on the government’s request for a venue change, the latest salvo in a fight over alleged “forum shopping” in the case.

The DOL’s attempt to move the case out of the US District Court for the Northern District of Texas in Amarillo demonstrates that the department doesn’t believe Trump-appointed Judge Matthew J. Kacsmaryk will rule fairly, but lacks “the courage of their convictions” to file a motion for his recusal, the plaintiffs argued in an opposition motion late Tuesday.

Kacsmaryk has been responsible for undoing a string of Biden federal actions. The appeals court that encompasses Texas, the Fifth Circuit, is largely considered one of the nation’s most conservative appellate benches.

The department argued that the case should be moved to Washington, D.C., or elsewhere in Texas because the Northern District only has a single judge. The transfer would avoid the appearance of venue shopping and discourage litigious gamesmanship, the government argued.

Although Texas is a plaintiff in the case, the defense argued that none of the plaintiffs resided in the division in which the case had been filed. The proper home venue for the government of Texas would be the state capital of Austin, they argued.

According to filing records, plaintiffs added Alex Fairly to the case on Feb. 28. Fairly is a 401(k) plan sponsor based in Amarillo, Texas, squarely within the division boundaries, but he was added to the case 21 days after the government filed its change-of-venue motion.

“Fairly had not joined the case when the Defendants filed their motion, which allowed them to skirt the real reason they want this case transferred: they doubt that the Court will determine this case fairly,” the plaintiffs argued Tuesday. “They couch their doubt in terms of ‘public perceptions’ of impartiality—but if reasonable members of the public believe the Court isn’t impartial, that is a basis for a recusal, not a change in venue.”

Both the state of Texas and Fairly’s addition to the case makes it a local issue in the Northern District, the plaintiffs allege.

Plaintiffs said the Texas court isn’t overly congested and that single-judge jurisdictions like Amarillo aren’t “sinister, harmful, or contrary to the ‘public interest,’” since they are common and a historical norm.

The department’s rule permits private-sector workplace retirement plans to consider environmental, social, and corporate governance factors when selecting and monitoring investments on behalf of participants and beneficiaries. The rule has come under fire from the GOP who have accused the department of forcing a “woke” political agenda on American investors.

Plaintiffs in the Northern District case say the department is prioritizing ESG factors over the retirement savings of nearly two-thirds of the US population that saves for retirement at work.

The 25 red-state attorneys general late last month filed proposed motions for preliminary and permanent injunctions that would block the department from enforcing the rule. The department hasn’t yet responded to the initial complaint or proposed motions and has deferred media requests on the case to the US Justice Department, which didn’t immediately respond to a request for comment Wednesday.

The department is also being sued in a federal court in Wisconsin over the rule, and Republicans on Capitol Hill are coalescing around a resolution that would block the department from enforcing it.

The case is Utah v. Walsh, N.D. Tex., No. 2:23-cv-00016, motion filed 2/28/23.