by Cydney Posner
As noted in Law360, a DC District Court has granted the SEC’s motion to dismiss a complaint filed to compel the SEC to act on a rulemaking petition regarding corporate political spending disclosure. Of course, as discussed in this PubCo post, a provision prohibiting the SEC from adopting requirements for political spending disclosure — at least for now — was included as part of the omnibus spending bill, which provides that “[n]one of the funds made available by any division of this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.”
The petition at issue in this case was filed on May 8, 2014. It followed, and incorporated by reference, the rulemaking petition that was filed in 2011 requesting that the SEC mandate corporate political spending disclosure. The 2011 petition received over a million signatures in support, but the SEC took no action. As a result, the petitioner filed this new petition reiterating the request for rulemaking on political spending disclosure. Although the SEC flirted with the possibility, when the SEC’s 2014 agenda was revealed, it no longer included any intention to propose disclosure of corporate political spending. As discussed in this PubCo post, SEC Chair Mary Jo White has been firmly against any such undertaking, contending that the SEC should not get involved in politics. However, because the SEC had still not responded to this new petition, the petitioner sued the SEC under the Administrative Procedure Act to challenge the agency’s inaction as arbitrary, capricious and contrary to law, as well as to compel the SEC to act on the petition.
The court dismissed the complaint. First, with regard to the SEC’s failure to respond to the petition, the Court held that, as a district court, it lacked jurisdiction because, under the Exchange Act, exclusive jurisdiction to review all “final order[s]” is vested in the courts of appeals. As a result, “neither potential response to [the] petition for rulemaking –– a final order denying or granting the petition –– would be reviewable by this Court.” With regard to the count seeking to compel the SEC to act on the petition, the court saw this rulemaking to be within the SEC’s “broad discretionary powers” under the Exchange Act, not an action the SEC was compelled to take. The petitioner contended that the SEC’s failure to act was an “effective denial” of his petition and claimed that SEC was required to provide a sufficient explanation to support its denial of the petition. However, the court held, because the SEC had not in fact denied the petition, but had just failed to respond, and the petitioner had not asserted that the SEC “failed to act in response to a clear legal duty,” the petitioner “failed to state a valid APA claim upon which relief can be granted.”
According to Law360, the organization that brought the litigation on behalf of the petitioner expressed disappointment with the court’s decision and indicated that the organization “is considering whether to refile the remaining claim in the circuit court.”