Month: March 2024
SEC requests court deny stay in climate disclosure rules litigation
It’s been a day or two now—what’s going on with the SEC’s climate disclosure rules litigation? When we left our tale, petitioners Liberty and Nomad had submitted this notice of pending emergency motion advising the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the rules. And the SEC was directed to file a response by the close of business yesterday. (See this PubCo post.) As directed by the Court, the SEC did submit a letter of response. Now, another petitioner, the U.S. Chamber of Commerce, has also moved for a stay pending appeal. And a new petition for review has been filed.
Can director commitments policies help prevent overextended boards?
There is a lot going on at companies, and—you may be surprised to hear—not all of it is new regulation. There are new technologies, such as AI, global political instability and social change, not to mention ESG and cybersecurity. Many of these topics, as they affect a company, fall within the remit of the board for oversight. The energy and time necessary can be overwhelming. In this article, Director Commitments Policies, Overboarding, and Board Refreshment, proxy advisory firm Glass Lewis discusses one way to help ensure that directors have “sufficient time and energy to fulfill their duties and obligations to shareholders”: a director commitments policy. As a corollary, GL maintains, these policies can also serve to boost board refreshment, and can represent a vital measure of corporate governance.
Back on the SEC climate rules rollercoaster in the Eighth Circuit—will a new stay be granted?
Liberty Energy Incorporated and Nomad Proppant Services LLC decided to give it another go. Are you surprised? In this notice of pending emergency motion, Liberty and Nomad advise the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the SEC’s final climate disclosure rules. As you may remember, a petition for review of the final rules was filed by Liberty and Nomad on March 6 in the Fifth Circuit and their motion for an administrative stay was granted on March 15. That case was just one of nine challenging the SEC’s rules in six different circuits. Upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Following that consolidation order, the Fifth Circuit ordered the transfer of Liberty’s petition to the Eighth Circuit and the dissolution of the administrative stay. (See this PubCo post.)
Can companies escape the trap of politics?
We hear a lot about companies taking public positions on political issues—as well as the backlash that many experience as a result. Whether you think corporate participation in politics is a good thing or a bad thing, you might be interested in this thought-provoking paper from the University of Pennsylvania Institute for Law & Economics, How Did Corporations Get Stuck in Politics and Can They Escape?,© by Professors Jill Fisch and Jeff Schwartz (All rights reserved, 2024). In their paper, the authors observe that, while, historically, companies have long engaged in politics and lobbying, something seems quite different today. How? The difference is that companies seem to be taking public positions on any number of hot political issues, even if those issues are not connected to the conduct of their businesses. That is, while companies may take these positions “for business reasons—to appeal to their customers, employees, or investors”—these issues are not necessarily intrinsic to their business operations. The authors contend that this type of corporate behavior, which they call “corporate political posturing,” is “problematic,” creating potential risks for the company, its shareholders and for society. The authors suggest some ways for companies to depoliticize, including through coordinated “voluntary disarmament.” Certainly, some ideas to think about.
Stay of SEC climate disclosure rules lifted
As discussed in these PubCo posts from Monday, Saturday, Tuesday and Thursday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits. As previously reported, upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Bloomberg has reported that, of 17 appellate judges in the Eighth Circuit, only one was appointed by a Democrat. Not that the politics should matter, of course.
Judicial Panel consolidates petitions challenging SEC climate disclosure rules
As discussed in these PubCo posts from Monday, Saturday and Tuesday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.”
New Cooley Alert: “Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks”
If you’ve been following the developments in climate disclosure regulation, you know that many U.S. companies may well be subject to disclosure regulations beyond those of the SEC; regulations adopted in the European Union, countries outside the EU and in some states, such as California, could be applicable. And some aspects of those regulations are more sweeping—or just different—than those recently adopted by the SEC. For example, the EU employs the concept of “double materiality,” meaning the impacts of companies’ “business on the environment and society irrespective of the positive or negative effect of such impacts on companies’ financials”; by contrast, the SEC looks at materiality from the perspective of the reasonable investor making investment or voting decisions. In light of these and other differences, companies may face challenges in attempting to implement all of the applicable rules. This essential new Cooley Alert, Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks, from our ESG group provides some welcome guidance in sorting through the requirements of the different frameworks.
Where will the fate of the SEC’s final climate rules be determined?
As discussed in these PubCo posts from Monday and Saturday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine filed (so far) challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.” As previously noted, the longevity of the Fifth Circuit stay, as well as the ultimate outcome of litigation about the rules, could well be determined by another court that is designated by the Judicial Panel on Multidistrict Litigation to hear the multiple pending challenges to the rules on a consolidated basis. How does that work? This article in Bloomberg does some explaining.
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