Tag: Administrative Procedure Act

administrative lawCorporate law

New Cooley Alert: Texas Court Blocks FTC’s Noncompete Ban

In April, the Federal Trade Commission voted, three to two, to prohibit post-employment noncompete agreements with workers (discussed in this April 2024 Cooley Alert).  With some exceptions, the prohibition would have banned virtually all post-employment noncompete agreements in the U.S. beginning on September 4, 2024. But, as discussed in this timely new Cooley Alert, Texas Court Blocks FTC’s Noncompete Ban, from our Labor and Employment group, on August 20, 2024, the Northern District of Texas in Ryan LLC v. Federal Trade Commission issued an order blocking the FTC rule banning all post-employment noncompete agreements from taking effect.  As a result, the Alert concludes, “for the time being, employers using noncompetes may continue to utilize them, subject to applicable state laws.”

/ August 23, 2024
administrative law

In Ohio v. EPA, SCOTUS reinforces powerful role of judiciary in agency oversight

As has been widely discussed, the administrative state took quite a shellacking this last SCOTUS term. But as I noted earlier, it wasn’t just the elimination of Chevron deference in Loper Bright (see this PubCo post) or administrative enforcement proceedings seeking civil penalties in SEC v. Jarkesy (see this PubCo post).  There were at least a couple of other cases this term that contributed to the drubbing.  One of them, Corner Post, Inc. v. Board of Governors of the Federal Reserve System, had the effect of extending the statute of limitations under the Administrative Procedure Act (see this PubCo post).    Another case,  Ohio v. EPA, in which SCOTUS put a temporary hold on the “good neighbor” provision of the Clean Air Act because EPA failed to “reasonably explain” its action, might also be worth your attention.  In Ohio, Justice Neil Gorsuch, writing for the majority, concluded that enforcement of EPA’s rule should be stayed because the challengers were likely to prevail on the merits.  Why? Because EPA had provided an inadequate explanation for the continued application of the emission control measures in the plan in response to comments. Where have we heard this “failure-to-explain” theory recently?  How about Chamber of Commerce of the USA v. SEC, vacating the SEC’s share repurchase rule for, among other things, failure to respond to petitioners’ comments (see this PubCo post) or even National Association of Manufacturers v. SEC, vacating the 2022 rescission of certain proxy advisor rules for arbitrarily and capriciously failing to provide an adequate explanation to justify its change (see this PubCo post).  Justice Amy Coney Barrett dissented, joined by Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, contending that the majority opinion “risks the ‘sort of unwarranted judicial examination of perceived procedural shortcomings’ that might ‘seriously interfere with that process prescribed by Congress.’” As characterized by Professor Nicholas Bagley of the University of Michigan Law School in Michigan Law, in its “broad strokes,” the dissent asserted that “courts shouldn’t be in the business of fly-specking lengthy notice-and-comment records,” especially with the benefit of hindsight. The question, he continued, “is whether the agency has behaved arbitrarily and capriciously, and that’s a pretty demanding standard.” With this decision, SCOTUS amplifies the increasingly powerful role of the judiciary in overseeing federal agencies, adding to the decisions this term seeking to rein in the administrative state.

/ July 24, 2024
administrative lawLitigationSecurities

In Corner Post, SCOTUS takes another swipe at the administrative state

This term, SCOTUS delivered two big wallops to the administrative state in the decisions eliminating Chevron deference (Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept of Commerce, see this Pubco post) and the use of administrative enforcement proceedings seeking civil penalties ( SEC v. Jarkesy, see this PubCo post). But that wasn’t all.  There were at least a couple of other cases this term that reflected the same kind of skepticism toward the administrative state.  They might be worth your attention.  One of them, Corner Post, Inc. v. Board of Governors of the Federal Reserve System, discussed below, concerned the statute of limitations under the Administrative Procedure Act. For our purposes, though, the potentially critical repercussion of Corner Post was articulated in the dissent by Justice Ketanji Brown Jackson, who argued that the case effectively decimated the limitations period for facial challenges to agency regulations, setting up the potential for a never-ending series of challenges to long-standing regulations and perhaps even, yes, gaming of the system.

/ July 18, 2024
Executive CompensationSecurities

Bring back the buyback rule?

According to Bloomberg, there’s now a bipartisan push to re-propose the SEC’s stock buyback rule. As you may remember, the SEC’s Share Repurchase Disclosure Modernization rule, adopted in 2023, required quarterly reporting of detailed quantitative information on daily repurchase activity, filed as an exhibit to the issuer’s periodic reports. But, last year, the Chamber of Commerce petitioned the Fifth Circuit for review of the rule, and, in Chamber of Commerce of the USA v. SEC, the court granted the petition, holding that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that there was “at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the court decided that, instead of vacating the rule, it would allow the SEC 30 days “to remedy the deficiencies in the rule,” and remanded the matter with directions to the SEC to correct the defects in the rule. But the SEC was unable to correct the defects on a timely basis, and the court vacated the rule. (See this PubCo post.)  Now, Senators Marco Rubio and Tammy Baldwin have submitted a letter to the SEC urging the SEC “to promptly re-propose the rule.”

/ May 10, 2024
LitigationSecurities

It’s back to the future—or is it forward to the past?—on share repurchase disclosure

On December 19, a Fifth Circuit panel pulled the plug on the SEC’s Share Repurchase Disclosure Modernization rule, issuing an opinion vacating the rule.   On Friday last week, Corp Fin announced that, yes, the rule had been vacated and, in case you were wondering, “the disclosure requirements revert to those in effect prior to the Final Rule’s effective date.”  It remains to be seen whether the SEC will repropose new rules on this topic or has its hands full with other stuff—like climate disclosure—and so will just let this one lie.

/ February 12, 2024
LitigationSecurities

Fifth Circuit pulls the plug on SEC’s final share repurchase rule

On October 31, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the SEC’s Share Repurchase Disclosure Modernization rule. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that there was “at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court decided that, “short of vacating the rule,” it would put the rule on life support, allowing the SEC 30 days “to remedy the deficiencies in the rule,” and remanded the matter with directions to the SEC to correct the defects in the rule.  The three-judge panel, however, “retain[ed] jurisdiction to consider the decision that is made on remand.” The deadline was set at November 30, 2023. On November 22, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule.  As a result, the rule was stayed pending further SEC action. (See this PubCo post.) On the same date, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. In its motion, the SEC said only that, “[s]ince the remand, the Commission’s staff has worked diligently to ascertain the steps necessary to comply with the Court’s remand order and has determined that doing so will require additional time.”  The SEC said in the motion that it would provide an update within 60 days on the status of its efforts. Not surprisingly, the Chamber opposed the motion. On November 26, the Court issued an Order, refusing to grant the extension, and on December 1, at the request of the Clerk of the Court, the SEC’s Office of General Counsel submitted a letter to the Court advising that the SEC would not be able to correct the defects by the Court-imposed deadline. (See this PubCo post, this PubCo post,  this PubCo post and this PubCo post.)  On December 7,  the Chamber filed a motion to vacate the SEC’s final share repurchase rule. As recounted by the Chamber, the SEC advised the Chamber that it took no position on the Chamber’s motion. Today, acting by a quorum (with one judge recused), the Court pulled the plug, issuing an opinion vacating the repurchase rule.  Will the SEC repropose a new repurchase rule?

/ December 19, 2023
LitigationSecurities

Chamber files motion to vacate SEC’s final share repurchase rule

On October 31, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the SEC’s Share Repurchase Disclosure Modernization rule. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that there was “at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court decided that, “short of vacating the rule,” it would put the rule on life support, allowing the SEC 30 days “to remedy the deficiencies in the rule,” and remanded the matter with directions to the SEC to correct the defects in the rule.  The three-judge panel, however, “retain[ed] jurisdiction to consider the decision that is made on remand.” The deadline was set at November 30, 2023. On November 22, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule.  As a result, the rule was stayed pending further SEC action. (See this PubCo post.) On the same date, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. In its motion, the SEC said only that, “[s]ince the remand, the Commission’s staff has worked diligently to ascertain the steps necessary to comply with the Court’s remand order and has determined that doing so will require additional time.”  The SEC said in the motion that it would provide an update within 60 days on the status of its efforts. Not surprisingly, the Chamber opposed the motion. On November 26, the Court issued an Order, refusing to grant the extension, and on December 1, the SEC’s Office of General Counsel submitted a letter to the Court advising that the SEC would not be able to correct the defects by the Court-imposed deadline. (See this PubCo post, this PubCo post,  this PubCo post and this PubCo post.)  Today, the Chamber filed a motion to vacate the SEC’s final share repurchase rule. As recounted by the Chamber, the SEC advised the Chamber that it took no position on the Chamber’s motion. Will the Court now pull the plug on the repurchase rule?

/ December 7, 2023
LitigationSecurities

SEC concedes unable to correct defects in buyback rule

On October 31, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the SEC’s Share Repurchase Disclosure Modernization rule. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that there was “at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court decided that, instead  of vacating the rule, it would allow the SEC 30 days “to remedy the deficiencies in the rule,”  and remanded the matter with directions to the SEC to correct the defects in the rule.  The three-judge panel, however, “retain[ed] jurisdiction to consider the decision that is made on remand.” The deadline was set at November 30, 2023. On November 22, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule.  As a result, the rule was stayed pending further SEC action. (See this PubCo post.) On the same date, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. In its motion, the SEC said only that, “[s]ince the remand, the Commission’s staff has worked diligently to ascertain the steps necessary to comply with the Court’s remand order and has determined that doing so will require additional time.”  The SEC said in the motion that it would provide an update within 60 days on the status of its efforts. Not surprisingly, the Chamber opposed the motion. On November 26, the Court issued an Order, refusing to grant the extension. The question then was whether or not the SEC would still submit an analysis to the Court attempting to correct the defects by the court-imposed deadline. (See this PubCo post, this PubCo post and this PubCo post.)  Now we have the answer.

/ December 1, 2023
LitigationSecurities

Fifth Circuit denies SEC request for more time to cure defects in share repurchase rule

You might recall that, on Halloween, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the Share Repurchase Disclosure Modernization rule. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that “there is at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court decided that, instead of vacating the rule, it would allow the SEC 30 days “to remedy the deficiencies in the rule,”  and remanded the matter with directions to the SEC to correct the defects in the rule.  The three-judge panel, however, “retain[ed] jurisdiction to consider the decision that is made on remand.” The deadline was set at November 30, 2023. On Wednesday before Thanksgiving, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule.  As a result, the rule was stayed pending further SEC action. (See this PubCo post.) Also on Wednesday, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. Not surprisingly, the Chamber opposed the motion. On Sunday, the Court issued an Order, refusing to grant the extension. What’s next?

/ November 27, 2023
LitigationSecurities

SEC postpones effective date of share repurchase rule

Today, the SEC announced that it had issued an order postponing the effective date of the Share Repurchase Disclosure Modernization rule.  As a result, the Rule is stayed pending further SEC action.  Why? You might recall that, on Halloween, the Fifth Circuit issued an opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review of the final share repurchase rule and remanding to the SEC “to correct the defects” that the Court had identified.   The deadline was set at November 30, 2023.  Under the Administrative Procedure Act, the SEC observed, an agency may “postpone the effective date of action taken by it” pending judicial review when it finds that “justice so requires.”   According to the SEC, in light of the Fifth Circuit’s decision, the SEC found that it was “consistent with what justice requires to stay the effectiveness of the Repurchase Rule pending further Commission action.” Will the SEC ultimately repair the defects to the satisfaction of the Court? Will the Court ultimately vacate the rule? That all remains to be seen.

Happy Thanksgiving!

/ November 22, 2023
1 2