A recent case has made clear that a government agency’s ceasing doing business with a company based on the viewpoints of the company’s owners can lead to First Amendment liability for the agency.  Earlier this year, in Riley’s American Heritage Farms v. Elsasser, the United States Court of Appeals for the Ninth Circuit (the federal appellate court covering California), held that a California school district potentially violated a field trip vendor’s First Amendment rights.  The Ninth Circuit ruled that when the school district ceased its longstanding business relationship with the vendor upon receiving complaints from parents about controversial social media posts by the company’s owner, it raised First Amendment issues.

The two important take-aways from the case are: (1) when ceasing a business relationship because of viewpoints associated with a private company, the same First Amendment test applies as for speech by public employees (i.e., the “Pickering” test), and (2) whether the speech at issue causes or threatens to cause sufficient disruption at the agency constitutes an important factor Courts will consider in determining whether a decision to cease doing business in this context is constitutional.

Factual Background

Riley’s American Heritage Farms (“Riley’s Farm”) provides historical reenactments from the American Revolution, the Civil War, and historical farm life for students on school field trips.  It also hosts events such as apple picking.  For many years, the Claremont Unified School District arranged for student field trips to Riley’s Farm. The principal shareholder of the company used his personal Twitter account (separate from any social media account for business) to comment on a range of controversial topics, including, as the Ninth Circuit opinion described: “President Donald Trump’s alleged relationship with Stormy Daniels, President Barack Obama’s production deal with Netflix, Senator Elizabeth Warren’s heritage, and Riley’s opinions on gender identity.”  Parents of students in the District learned of the posts, and reported them to the District as alarming and biased.  In August 2018, a parent of a kindergarten student emailed to her child’s teacher: “I do NOT feel comfortable with my son patronizing an establishment whose owner (and/or family/employees) might be inclined to direct bigoted opinions towards my child or other vulnerable children in the group.”  Other parents began to make similar communications to teachers and administrators at the District, local news media reported on the controversy, and ultimately field trips to Riley’s Farm from District schools stopped.  (The District disputed whether there was any actual policy prohibiting field trips.)  Riley’s Farm and its owner sued District officials in federal court, contending that the discontinuation of business constituted retaliation prohibited by the First Amendment.  They contended it essentially constituted punishment of the owner for his speech on social media.

The Trial Court found in favor of the District officials, on the basis that their damages claim was barred by qualified immunity, a defense available to public officials based on lack of clarity in the law, as described below.  The Trial Court also ruled that Riley’s Farm’s separate injunctive relief claim failed because there was no evidence the school district continued to have a policy against doing business with the company.

The Court’s Ruling in Riley’s

The Court of Appeals reversed in part.  Although it ultimately agreed that qualified immunity barred Plaintiffs’ damages claims, it determined that the injunctive relief claim survived because evidence in the record showed the school district did appear to have a policy of not patronizing Riley’s Farm.

As to the issue of First Amendment liability, the Court held it was possible on the record that liability existed, so that summary judgment for either side was not possible.  Further proceedings were necessary, including possibly a trial.

          a. First Amendment Rights of Businesses

In reaching its decision, the Court of Appeals mapped out how First Amendment law applied to an agency’s decisions as to its business relationships.  The Court began by reciting the general rule that the government may not punish individuals for protected speech without violating the First Amendment.  The question, the Court continued, was whether First Amendment law allowed the government some leeway when it came to choosing which business relationships to continue or discontinue.  The Court explained that it did, and that the appropriate analogy to the agency-vendor relationship is the agency-employee relationship.  The agency-employee relationship is governed by the “Pickering” test (from the seminal 1968 U.S. Supreme Court case on public employee speech rights Pickering v. Board of Education).  This test acknowledges that government employees have First Amendment free speech rights as against their own employer, but that those rights are diminished when compared to rights of members of the public generally.  The Court observed that appellate decisions had already applied this test to a number of different types of contracting relationships, and ultimately determined that the test should apply in the Riley’s case as well, even though the business relationship was less formalized and not pursuant to a specific contract.

          b. How the First Amendment Rights Applied

The Court proceeded to apply the Pickering test as follows.  It explained that the test requires among other things, that the speech be on a matter of “public concern,” that the plaintiff suffer an adverse action from the government agency because of the speech, and that the agency demonstrate that it caused the adverse action because the agency “had ‘legitimate countervailing government interests [that were] sufficiently strong’ . . . to ‘outweigh the free speech interests at stake.’”  (Quoting authority.)  Under applicable precedent, an agency can make this demonstration by showing that the speech at issue caused sufficient actual or threatened disruption of the agency’s operations.

The Court determined that Riley’s speech on Twitter satisfied the “public concern” requirement, because of “public concern” includes speech on such topics as “politics, religion, and issues of social relations.”  The Court next found that Riley’s Farm suffered an adverse action as a result of discontinued business from District field trips.  Finally, the Court determined that the District did not meet its burden under the balancing of interests, in particular because the District’s evidence did not show significant actual or threatened disruption from Riley’s speech on Twitter.

In concluding the District has presented insufficient evidence to prevail in the balancing of interests, the Court emphasized, first, that there was only an “attenuated relationship between Riley’s controversial speech and the field trips themselves.”  In particular, “Riley’s controversial tweets were made on his personal Twitter account, and did not mention or reference the School District or field trips to Riley’s Farm in general,” there were no allegations “that Riley made (or planned to make) any controversial statements during a school field trip,” and there were “no allegations that he interacted at all with the students during the field trips.”

Second, no sufficient evidence of disruption existed.  The District presented the Trial Court with only “two complaints from parents, only one of which involved a student currently enrolled in the School District,” and a reference to other parents excusing themselves from trips, without the District describing “the number of parents or the nature of those complaints.”  (By contrast, other cases had found complaints from 60 or “hundreds” of parents sufficient evidence of disruption under the circumstances of those cases for the school district to prevail on balancing.)  There was also insufficient evidence of future disruption, in that only a handful of parents appears to have asked that their students be excused from a single field trip.  The Court also observed, in evaluating disruption, that there had been only relatively sparse media attention directed to Riley’s tweets, compared to other cases in which a significantly greater public controversy arose.

The Court of Appeals did, however, confirm that the doctrine of qualified immunity blocked any damages claims against officials of the District.  Under the doctrine of qualified immunity, a public official who violates an individual’s constitutional rights is nevertheless not liable in damages if those rights were not clearly established at the time of the misconduct.

Qualified immunity, however, did not apply to Plaintiffs’ request for injunctive relief.  That meant Plaintiffs’ case for injunctive relief could proceed.

Import of the Riley’s Case Ruling

The case illustrates hazards in an agency’s terminating a business relationship with an individual or company based on the political, social, or other views they express, particularly when that expression of views has no connection to the services the individual or company has offered.  Under the test described by Riley’s, however, it is possible for an agency to do so without violating the First Amendment.  To do so, the agency must be able to present sufficient evidence it would prevail in a balancing of interests, including sufficiently persuasive and substantial evidence of the disruption caused by the speech at issue or that could be caused.

Given the often complex nature of this area of law, it is helpful to consult trusted legal counsel when these types of First Amendment issues arise.  Federal case law will likely soon provide further answers in these areas.