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.
As noted above, nine petitions have thus far been filed challenging this rulemaking in different circuits, seven by Republican state attorneys general, businesses and business lobbying and trade organizations, such as the Chamber of Commerce, and two by environmental organizations, the Sierra Club and the Natural Resources Defense Council. As discussed in the article, the seven petitions challenging the expanse of the rules and the authority of the SEC have been filed in the circuits that tend to skew conservative, and the two petitions that claimed the SEC left out some important stuff were filed in the D.C. and second circuits, which tend to skew more liberal. Purely fortuitous selections, of course. For example, Bloomberg indicates, of 17 appellate judges in the Eighth circuit, only one was appointed by a Democrat; of 18 appellate judges in the Second Circuit, only 11 have been appointed by a Republican. Not that their politics should matter, of course.
How does the court selection process work? As Bloomberg reports, the process is triggered by a request from the SEC to the Judicial Panel on Multidistrict Litigation to consolidate the cases. Then, one of these courts, selected randomly in a lottery—literally—could begin to determine the outcome of the stay, and the entire rulemaking, as soon as this week. According to the article, the “courts that have received cases related to the SEC rules would each get one entry in a ‘drum,’ from which a clerk based in Washington would draw the name of the venue to hear the consolidated case.” This system previously has been employed in the context of federal regulations that attracted a number of challenges.
Does the Fifth Circuit, in which four of the cases were filed, have an advantage? Not according to Bloomberg: the Fifth Circuit “would have the same chance of snagging the case as the five other courts that collected single challenges.” As explained by one commentator, the “whole point of it is to ensure faith in the judicial system such that this is really a random selection and that that doesn’t feel like people are gaming the system.”
Bloomberg reports that “[l]awyers for the challengers said they weren’t attempting to manipulate the lottery toward a court with a certain leaning by filing their lawsuits where they did.” In its response to the Liberty Energy petition, however, the SEC seemed a bit dubious, contending that there was “no reason to rule on petitioners’ stay motion now, before the Judicial Panel on Multidistrict Litigation even assigns a court to hear the multiple pending challenges to the rules….And to the extent petitioners intend to urge this Court to act before venue is determined—in the absence of any immediate harm—the Court should reject such forum shopping.” But then, the article reports, one of petitioners’ counsel questioned the SEC’s motives, contending that, even in adopting the climate rules, the SEC was “playing politics.”
