24 May 2023

Disney v. DeSantis Creates Strange Bedfellows

On April 26, 2023, Disney escalated its public feud with Ron DeSantis, Florida’s current Governor and a 2024 presidential hopeful, by suing him and other lawmakers in federal court. The corporate behemoth, Florida’s largest single taxpayer and one of the largest employers in the state, alleges that the Governor violated its constitutional rights by seeking to undermine its development contracts and change its leadership, thereby reducing the value of its property. The complaint turns on a series of legislative actions DeSantis took in response to Disney’s tepid and rather anodyne criticism of the so-called “Don’t Say Gay” bill he championed. Disney alleges these were “patently retaliatory, patently anti-business, and patently unconstitutional.”

The context in which the case has arisen allows Disney to look like a brave defender of LGBTQAI+ rights facing down a Republican Governor who seems hellbent on destroying them. In reality, though, Disney is no liberal darling. For one, it only chose to offer feeble criticism of DeSantis’ anti-LGBTQAI+ bill weeks after it passed, motivated by the persistent lobbying by both its employees and activists. More worryingly, however, the constitutional arguments the complaint makes and the context in which they are made—in a Florida federal court where the appeals bench is deeply conservative—open the door to buttress and expand a conservative reading of several constitutional provisions. If the case is appealed up to the Eleventh Circuit, where six of the eleven judges are Trump appointees, or further to the U.S. Supreme Court, where there is a conservative supermajority, the optics of finding in favor of Disney against DeSantis may provide some welcome political cover in an environment in which conservative judges have been increasingly accused of judicial activism.

The ”Don’t Say Gay” Bill and Disney’s Special Status

Disney’s lawsuit has its roots in Florida’s Parental Rights in Education Act, which prohibits the discussion of sexual orientation and gender identity in primary schools. Dubbed by its critics the “Don’t Say Gay” bill, it also restricts these discussions at other grade levels if they are “not age-appropriate or developmentally appropriate for students” and permits parents to bring suit against their child’s school if they believe these discussions have occurred.

The bill drew immediate national attention and sparked protests across Florida and around the country even before it went into effect. Critics alleged that it amounted to censorship and sent a discriminatory message that LGBTQ status is “inappropriate or wrong.” Yet, leadership at Disney remained quiet. Only after its employees called on the company to publicly denounce the legislation and weeks after the bill passed, then-CEO Bob Chapek offered a tepid acknowledgment, expressing to shareholders that he knew “many [were] upset that we didn’t speak out against the bill.” Chapek then also called DeSantis before he signed the bill to express his disappointment and invited him to meet some of Disney’s LGBTQ+ employees to hear their concerns. Disney also signed a statement by the Human Rights Campaign (“HRC”), an LGBTQ advocacy group, denouncing the legislation in Florida and similar legislation in other states, and pledged five million dollars to organizations “working to protect” LGBTQ+ rights. But HRC rebuffed these gestures, saying they were too little, too late. Employees of Disney were also extremely critical; Disney writer Ben Siemon called Chepak’s efforts a “half-hearted triage.”

Nonetheless, it was enough to inspire retaliation by DeSantis and Republican lawmakers. Florida Republicans passed a string of laws designed to strip Disney of its power over the Reedy Creek Improvement District, a 25,000-acre area that employs 75,000 people. Within it, Disney operates much like a municipal government, maintaining full control over decisions about new construction and development and the authority to create roads and provide emergency services. The District was created by the state of Florida at the behest of Disney 55 years ago with the stated purpose of supporting tourism. Until changes recently ushered in by DeSantis, the board that oversaw the District was selected by the district’s primary landowner, Disney.

Calling the agreement creating the Reedy Creed Improvement District “a unique and special privilege,” DeSantis, together with Florida lawmakers, passed legislation that would replace the Disney-friendly board with a new Commission to be selected by the Governor. Anticipating this legislation, Disney worked quietly to strip DeSantis’s Commission of all its power by creating a so-called Declaration of Restrictive Covenants, which gives Disney final say on any alterations to the property and binds in perpetuity. DeSantis’ newly appointed commission reacted by threatening to eliminate the company’s special tax status and build a prison next to the amusement park; it also signaled its intention to nullify the agreement Disney reached with the District in its waning days.

The Complaint

On April 26, 2023, the same day the new commission met for the first time, Disney filed a lawsuit against Governor DeSantis and other Florida officials. It seeks to protect two contracts (one of which was the Declaration of Restrictive Covenants) concluded with the Reedy Creek Improvement District governing future development on Disney’s property. These contracts effectively insulate Disney’s long-term plans and development privileges from the Commission that DeSantis created and assembled.

The Contracts Clause

While much has been made of Disney’s suit being an assertion of its free speech rights, the primary theory of its complaint focuses on the U.S. Constitution’s Contracts Clause. It prohibits States from passing “any… Law impairing the Obligation of Contracts,” including laws that would abrogate a local government’s own contracts with private entities. DeSantis and the government of Florida, Disney alleges, not only failed to honor a preexisting contract, it violated the U.S. Constitution by voiding the agreement. This argument elevates the suit from a contractual dispute to a constitutional one.

A careful reader will note that Disney’s complaint does not use any case law on the Contracts Clause from the last 100 years. Instead, it focuses on a construal that emphasizes the Clause’s role in protecting freedom to contract that was prevalent until the 1930s. During this time, known as the Lochner Era, the Supreme Court interpreted the Contracts Clause to vitiate state oversight and regulation of the marketplace, especially where this was aimed to protect laborers or consumers, such as through minimum wage laws. When Congress began to pass legislation related to the New Deal—which included wide-ranging financial regulations and public support programs—the Supreme Court’s inflexible reading of the Contracts Clause became implausible and began to give way. It later recognized that while the Contracts Clause is “facially absolute, its prohibition must be accommodated to the inherent police power of the State to safeguard the vital interests of its people [410].”

Disney’s reliance on Lochner Era caselaw is understandable because the complaint maintains that DeSantis is not, in fact, exercising Florida’s police power by undermining the contracts establishing Reedy Creek. This precludes the need for any balancing exercise to accommodate state interests. Still, Disney’s choice to invoke the Contracts Clause in the first place and its reliance on caselaw from the Lochner Era opens the door to a conservative appeals court to change the existing Contracts Clause jurisprudence in a lasting way. Indeed, the last few years have seen hopeful business-owner plaintiffs flooding the courts with lawsuits challenging federally- or state-imposed COVID-19 protections for tenants and workers on freedom of contract grounds. Against this backdrop, Disney’s suit may be the case that breaks the camel’s back. If this suit makes its way to an appeal—a distinct possibility—it will be heard before the 11th Circuit, where six of the eleven active judges are Trump appointees. Conservative judges are more likely to favor the interests of business over the state’s interest to regulate. If given the opportunity, a higher court might push Contracts Clause jurisprudence in a direction that resembles how it looked during the Lochner Era.

The Takings Clause

Disney’s second cause of action is based on the Takings Clause. Found in the Fifth Amendment, it requires that owners whose private property is taken for public use be compensated. Disney argues that because the contracts concluded between itself and the Reedy Creek Improvement District “secure valuable substantive rights in specific property,” the protections of the Takings Clause apply. The laws passed by the Florida legislature amount to an unconstitutional taking because they override those contracts. In making this argument, Disney quotes the late conservative Supreme Court Justice Antonin Scalia, who wrote in a concurrence that “when the government uses its own property in such a way that it destroys private property, it has taken that property.” This, it would seem, is a shot across the bow in response to DeSantis’ threats to build a prison next to Disney’s parks. In this argument, and in its hat-tip to Scalia, Disney seems to be aligning itself with conservative arguments about the potentially destructive nature of regulating private property.

The Free Speech Clause

Disney’s free speech arguments have dominated most headlines covering this suit. In particular, the company argued that both the state’s invalidation of its existing contracts and DeSantis’ reconstitution of Disney’s governing structure through legislation was retaliation for Disney’s statements about the “Don’t Say Gay” bill (pp. 66-71). Disney described its lawsuit as a last resort “to protect its cast members, guests, and local development partners from a relentless campaign to weaponize government power against Disney in retaliation for expressing a political viewpoint unpopular with certain State officials (p.2).”

The free speech guarantee prohibits the government from acting in retaliation for protected speech, even if its actions are otherwise legal.  A governmental act is considered to constitute retaliation where it “would likely deter a person of ordinary firmness” from exercising their rights. So far, plaintiffs relying on this test have all been individuals—usually state employees or prisoners. But Disney, of course, is a corporation. For the notion that corporations are entitled to free speech rights, Disney unsurprisingly cites Citizens United v. Federal Election Commission. Decided in 2010, the Supreme Court’s conservative majority held 5-4 that because the First Amendment extends to corporations, they could not be prohibited from making contributions to political campaigns. Citizens United constituted a controversial expansion of corporate rights, and their ability to participate in the political life of the country. While it was perfectly appropriate for Disney to invoke Citizens United as helpful precedent, its use also serves to further entrench an understanding of corporate rights that has mostly been championed by conservatives.

A Conservative Wolf in Progressive Clothing

Disney’s complaint put those who are rooting for the company in league with a host of judicial positions traditionally held by conservatives. It is strange for someone on the political left to highlight the First Amendment rights of one of the wealthiest and most powerful corporations in the world, however laudable or desirable its views may be in this particular case.  It is equally strange to believe that Reedy Creek, which was created through what can only be described as “an outrageous transfer of government power to a private entity,” should maintain its special self-governing and tax status. This is especially so when the legal argument that Disney uses to support this position is based on an early 20th Century reading of the U.S. Constitution that is hostile to exercises of the state’s police power, even if they advance general welfare.

Indeed, if the Eleventh Circuit hears this case on appeal and finds for Disney, a revival of the early-20th Century jurisprudence around the Contracts Clause could undermine the regulations that were extended by state governments during COVID-19. State employee plaintiffs who had their employment contracts terminated for refusing the vaccine mandate sued in Massachusetts and Washington State for violating the Contracts Clause, arguing that the vaccine requirement “operat[ed] as a substantial impairment” to their employment contracts. In another recent example, landlord plaintiffs filed a complaint against the state of New York alleging that COVID-19 rent stabilization laws violated the Contracts Clause. So far, none of them were successful, yet this might change if Disney’s lawsuit progresses through the American court system.

Progressives who are watching this case can thus only hope that the long-standing relationship between Disney and the state of Florida compels the parties to settle soon.

 


SUGGESTED CITATION  Redwood, Britta: Disney v. DeSantis Creates Strange Bedfellows, VerfBlog, 2023/5/24, https://verfassungsblog.de/disney-v-desantis-creates-strange-bedfellows/, DOI: 10.17176/20230524-140329-0.

Leave A Comment

WRITE A COMMENT

1. We welcome your comments but you do so as our guest. Please note that we will exercise our property rights to make sure that Verfassungsblog remains a safe and attractive place for everyone. Your comment will not appear immediately but will be moderated by us. Just as with posts, we make a choice. That means not all submitted comments will be published.

2. We expect commen