OKLAHOMA CITY – The district court ruling that Oklahoma’s anti-ESG Act is unconstitutional will be appealed to the state Supreme Court.
Glenpool retiree Don Keenan challenged House Bill 2034, the Energy Discrimination Elimination Act of 2022, in a lawsuit filed in December 2023.
Keenan served 19.5 years in the military and later worked for the Oklahoma Employment Security Commission in 1985-96 as the Disabled Veterans Employment Representative. After he retired from state service, Keenan was employed by the Sinclair refinery in Tulsa as its human resources director.
As a former Sinclair employee, Keenan “does not have any objections to oil and gas operations and believes they are important and critical to the world economy,” his attorney, former state Rep. Collin Walke of the Oklahoma City law firm Hall Estill, wrote.
However, as a retiree in the Oklahoma Public Employees Retirement System (OPERS), Keenan “does object to his retirement benefits being depleted because the Treasurer believes that making political statements with retiree dollars is more important than taking care of retirees themselves.”
Keenan said his lawsuit was intended to ensure that the State Treasurer “abides by his Oklahoma constitutional and statutory obligations to operate the retirement systems for the ‘exclusive benefit’ of its pensioners.”
Keenan argued that creation of a “blacklist” of companies that allegedly “discriminate” against the oil and gas industry – via their environmental, social and governance (ESG) policies – harmed him. He sued State Treasurer Todd Russ for enforcement of the Act and the creation of a list of firms that were not allowed to do financial business with state agencies, including state retirement systems.
In the third installment of the Treasurer’s banned list, which was issued in May, Russ added Barclays PLC to BlackRock Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America, State Street Corp., and Climate First Bank.
The OPERS board of trustees estimated the commissions, taxes, and fees related to divestment activity mandated by HB 2034 would cost the pension system $9.7 million. Consequently, the OPERS board voted to exercise an exemption to the law.
Oklahoma County District Judge Sheila Stinson cited three violations of the state Constitution in her Oct. 25 ruling against the Energy Discrimination Elimination Act of 2022, which prohibits the state from doing business with financial institutions deemed to be hostile to the energy industry.
Freedom of Speech “does not ‘just prevent outright prohibition on speech,’” Judge Stinson wrote. It also prohibits the government from “imposing unconstitutional conditions that chill or deter speech.” The government imposes an unconstitutional condition when it makes government benefits “contingent on endorsing a particular message…” The U.S. Supreme Court ruled in 1982 that a state’s “regulatory power over boycotts is limited when the boycott’s main purpose is to influence governmental action,” Stinson wrote.
She also said the Act “prohibits private causes of actions and assesses attorney fees against any individual or entity challenging the statute, with no consideration of whether they are successful or not in their challenge.”
In reaching her decision, Stinson wrote that she relied heavily on a similar ruling in a federal case from Missouri where a permanent injunction was issued in case that involved environmental, social, and corporate governance administrative rules.
“While the Missouri rules differ from the Oklahoma Act as to procedural requirements and applications,” Stinson found the case “persuasive as to the issue of commercial speech and the objective of similar legislation.”
Oklahoma’s anti-ESG law went too far, judge says She also concluded that Oklahoma’s Act “is more extensive than is necessary to serve the governmental interest.”
In her earlier grant of a partial summary judgment, the judge found there were constitutional violations pertaining to the “exclusive purpose of benefits” and “due process,” which she determined to be “unconstitutionally vague.”
In issuing her preliminary injunction on May 7, Stinson ruled that “divestiture or transfer of assets and investments has the potential to affect the financial soundness of investment accounts.” If the OPERS Board followed the Treasurer’s interpretation, she wrote, “the system’s assets could decrease or increase in value and potentially substantial[ly] alter the stability of the investment funds prior to a final determination by the Court.”
Less than a week after Judge Stinson granted summary judgment in Keenan’s lawsuit, attorneys for the State Treasurer announced on Oct. 30 that they would appeal her decision.
The State of Oklahoma is now represented in the lawsuit by three lawyers from the Attorney General’s Office: Garry M. Gaskins II, solicitor general; Will Flanagan, assistant solicitor general; and Zach West, director of special litigation.
Russ initially retained Oklahoma City lawyer Cheryl Plaxico, ex-wife of former state Attorney General Mike Hunter, to defend the Treasurer and the EDEA in the lawsuit. But after Stinson’s preliminary injunction on May 7, the state Attorney General announced two days later he was firing Plaxico and removing Russ from any decision-making authority in the litigation.