Why it matters: On December 28, 2015, the Fifth Circuit in Machete Productions, L.L.C. v. Page upheld a lower court's dismissal of a complaint brought by a film company that had been denied a grant under Texas's film incentive program. The production company claimed in its complaint that the incentive program violates the First Amendment because it allows Texas film commission officials to deny incentive grants for any film that they subjectively deem contains "inappropriate" content or "portrays Texas or Texans in a negative fashion." The Fifth Circuit disagreed, holding that, so long as the Texas Film Commission's grant program does not engage in content censorship or effectively prevent the expression of ideas, it does not violate the First Amendment merely by withholding funds for content it deems inappropriate or not in the public interest.

Detailed discussion: On December 28, 2015, the Fifth Circuit upheld a lower court's dismissal of a complaint brought by film production company Machete Productions L.L.C. (Machete) that alleged, among other things, that Texas's film incentive program violates the First Amendment because it allows the office overseeing it to deny incentive grants based on its subjective view of a film's content.

A bit of background: Like many states, the Texas legislature established a grant program entitled The Moving Image Industry Incentive Program (Incentive Program) in order to promote the Texas film industry and entice film production companies to film in that state. The Incentive Program is administered by the Music, Film, Television and Multimedia Office (Office) and the Texas Film Commission (TFC), and requires production companies to meet certain statutory requirements in order to qualify for grants. At issue in this case is the language contained in the Incentive Program that provides that, even if the statutory requirements for a grant are met by a production company, "[t]he [O]ffice is not required to act on any grant application and may deny an application because of inappropriate content or content that portrays Texas or Texans in a negative fashion, as determined by the [O]ffice, in a moving image project. In determining whether to act on or deny a grant application, the [O]ffice shall consider general standards of decency and respect for the diverse beliefs and values of the citizens of Texas."

According to the relevant facts set forth in the opinion, in 2009, Machete's affiliated company, Machete ChopShop (ChopShop) received preliminary approval for a grant under the Incentive Program for the film "Machete." In 2010, however, ChopShop's grant application was officially denied by the TFC because the film contained "inappropriate content or content that portrays Texas or Texans in a negative fashion." Despite this, Machete again applied for a grant under the Incentive Program for "Machete Kills" (the sequel to "Machete"), even though Governor Rick Perry's office warned Machete that the film "would never receive an Incentive Program grant due to the perceived political nature and content of the film." In June 2012, the TFC denied Machete's application due to "inappropriate content," at which point Machete sued the TFC and its individual current and former directors in Texas state court (later removed to the federal court in the Western District of Texas). Machete's amended complaint alleged, among other things, that the Incentive Program violated the First Amendment and sought injunctive relief enjoining the TFC from enforcing it. The district court dismissed Machete's complaint in its entirety, and Machete appealed to the Fifth Circuit.

The Fifth Circuit upheld the district court's dismissal of Machete's complaint. In analyzing Machete's First Amendment claims, the Court first addressed Machete's argument that it was being "discriminated against on the basis of viewpoint, thus violating its First Amendment rights." The Court rejected this argument, quoting U.S. Supreme Court precedent to hold that " '[t]he [g]overnment can, without violating the Constitution, selectively fund a program to encourage certain activities it believes to be in the public interest, without at the same time funding an alternative program which seeks to deal with the problem in another way. In so doing, the [g]overnment has not discriminated on the basis of viewpoint; it has merely chosen to fund one activity to the exclusion of the other.' " To hold otherwise, the Court said, " 'would render numerous [g]overnment programs constitutionally suspect.' " Moreover, the Court said, Supreme Court precedent provides that " '[a] government funding provision will not compromise First Amendment values as long as it '[does] not silence speakers by expressly threaten[ing] censorship of ideas,' or 'introduce considerations that, in practice, would effectively preclude or punish the expression of particular views.' "

Given this precedent, the Court affirmed the district court's dismissal of Machete's lawsuit with respect to its First Amendment claims, stating that "Machete has not shown that [the TFC's] denial of an Incentive Program grant 'effectively preclude[d] or punish[ed]' Machete from or for holding particular viewpoints in Machete Kills. . . Nor does it appear that the grant denial effectively prohibited Machete from engaging in protected First Amendment activity 'outside the scope' of the Incentive Program . . . Despite the denial of an Incentive Program grant, Machete Kills was still filmed in Texas, produced, and released. Machete does not dispute that it was free to engage in protected First Amendment activity without the benefit of an Incentive Program grant, and in fact did engage in such activity by making the film. Machete has not shown that it is clearly established that the First Amendment requires a state which has an incentive program like this one to fund films casting the state in a negative light. As such, it cannot show that [the TFC] violated Machete's clearly established rights in this context."

Click here to read the Fifth Circuit's 12/28/15 opinion in Machete Productions, L.L.C. v. Page.