Tag: National Association of Manufacturers Inc. v. SEC
Fifth Circuit vacates SEC rescission of “notice-and-awareness” provisions in proxy advisor rules
Is it ok for an agency to change its mind? Well that depends. If the agency was “arbitrary and capricious” in failing to provide an adequate explanation to justify its change, a court may well vacate that about-face. At least, that’s what just happened to the SEC and Chair Gary Gensler in the Fifth Circuit in National Association of Manufacturers v. SEC, the case challenging the SEC’s rescission in 2022 of some of the key controversial provisions governing proxy voting advice that were adopted by the SEC in July 2020 and favored by NAM—the notice-and-awareness provisions that were designed to facilitate engagement between proxy advisors and the subject companies. You may recall that, in July 2022, NAM filed a complaint asking that the 2022 rescission be set aside under the Administrative Procedure Act and declared unlawful and void, and, in September, NAM filed a motion for summary judgment, characterizing the case as “a study in capricious agency action.” The Federal District Court for the Western District of Texas begged to differ, however, issuing an Order granting summary judgment to the SEC and Gensler and denying summary judgment to NAM and the Natural Gas Services Group in this litigation (see this PubCo post). NAM appealed. In August last year, a three-judge panel of the Fifth Circuit heard oral argument on NAM’s appeal, and it was apparent that the Court was none too sympathetic to the SEC’s case, with Judge Edith Jones mocking the SEC’s concern with the purported burdens on proxy advisors as “pearl-clutching.” (See this PubCo post.) Now, almost a year later, in an opinion by Judge Jones, the panel has concluded “that the explanation provided by the SEC was arbitrary and capricious and therefore unlawful,” reversing the district court’s judgment and vacating and remanding to the SEC the 2022 rescission in part.
In Fifth Circuit oral argument, SEC faces challenge to preserve 2022 changes to proxy advisor rules
In December last year, the Federal District Court for the Western District of Texas issued an Order granting summary judgment to the SEC and Chair Gary Gensler and denying summary judgment to the National Association of Manufacturers and the Natural Gas Services Group in the litigation surrounding the SEC’s adoption in 2022 of amendments to the rules regarding proxy advisory firms, such as ISS and Glass Lewis. Those 2022 rules reversed some of the key controversial provisions governing proxy voting advice that were adopted by the SEC in July 2020 and favored by NAM. NAM’s complaint, filed in July last year, had asked that the 2022 rules be set aside under the Administrative Procedure Act and declared unlawful and void, and, in September, NAM filed its motion for summary judgment, characterizing the case as “a study in capricious agency action.” The District Court begged to differ, and NAM appealed. This week, a three-judge panel of the Fifth Circuit heard oral argument on NAM’s appeal. Let’s just say that the Court didn’t appear to be particularly sympathetic to the SEC’s case, with Judge Edith Jones mocking the SEC’s concern with the purported burdens on proxy advisors as “pearl-clutching.”
Texas court jettisons NAM challenge to SEC’s proxy advisor rules
Is it ok for an agency to change its mind? The Federal District Court for the Western District of Texas seems to think so—at least if the agency’s decision is “reasonable and reasonably explained.” So says this Order granting summary judgment to the SEC and Chair Gary Gensler and denying summary judgment to the National Association of Manufacturers and the Natural Gas Services Group in the litigation surrounding the SEC’s adoption in 2022 of amendments to the rules regarding proxy advisory firms, such as ISS and Glass Lewis. Those 2022 rules reversed some of the key controversial provisions governing proxy voting advice that were adopted by the SEC in July 2020 and favored by NAM. In July of this year, NAM filed a complaint asking that the 2022 rules be set aside under the Administrative Procedure Act and declared unlawful and void, and, in September, NAM filed its motion for summary judgment, characterizing the case as “a study in capricious agency action.” The Court begged to differ. But, no surprise, we haven’t heard the last of this matter—NAM has already filed its notice of appeal.
NAM celebrates victory over SEC on non-enforcement of proxy advisory firm rules—what did it really win?
Last week, in an action by the National Association of Manufacturers against the SEC and Chair Gary Gensler, the U.S. District Court for the Western District of Texas held that the SEC violated the Administrative Procedure Act when, in June 2021, Corp Fin stated that it would not recommend enforcement of the 2020 proxy advisory firm rules while those rules were under reconsideration. In 2022, however, the SEC formally adopted new amendments to the 2020 rules reversing some of the key provisions and, at the same time, rescinding Corp Fin’s non-enforcement statement. You might think that the adoption of the new 2022 rules and rescission of the non-enforcement statement would make NAM’s suit moot? At least, that’s what the SEC seemed to think when it moved to dismiss NAM’s complaint in August 2022, contending that the relief NAM sought would now be “meaningless.” But, in mid-September, the Court denied the SEC’s motion—citing West Virginia v. EPA—and late last week, the same Court granted NAM’s summary judgment motion for declaratory and injunctive relief: the SEC’s “suspension” of the rules was vacated because it violated the APA, and the SEC was enjoined from refusing to acknowledge or recognize the 2020 rule’s compliance date. NAM declared victory. But was it a hollow victory? Not according to NAM.
U.S. Chamber of Commerce won’t challenge pay-ratio rules — at least for now — and will focus instead on conflict minerals challenge
by Cydney Posner The WSJ is reporting that, contrary to all expectations (including my own), “the U.S. Chamber of Commerce isn’t planning to mount a legal challenge to the Securities and Exchange Commission’s pay ratio rule.”
Is a lot more at stake in the conflict minerals case than the conflict minerals disclosure rules?
by Cydney Posner An amicus brief filed in the conflict minerals case, National Association of Manufacturers, Inc. v. SEC, was submitted this week by a group of anti-smoking and other organizations dedicated to protecting public health: Truth Initiative, Public Health Law Center, National Association of County and City Health Officials, […]
Three-judge panel of D.C. Circuit again holds that mandatory disclosure requirement of conflict minerals rule violates First Amendment
by Cydney Posner In November 2014, the D.C. Circuit Court of Appeals granted the petitions of the SEC and Amnesty International for panel rehearing in connection with the conflict minerals case, National Association of Manufacturers, Inc. v. SEC. Today, a three-judge panel of the D.C. Circuit, by a vote of two […]
Will Congress revisit the conflict minerals rule?
by Cydney Posner According to a Bloomberg BNA report, a representative of the Chamber of Commerce, one of the plaintiffs in National Association of Manufacturers, Inc. v. SEC, the conflict minerals case currently pending in the DC Circuit, claims that the litigation “is sparking new interest by Congress in the requirements.” Don’t […]
House Republicans pressure SEC to end court battle over conflict minerals rule
by Cydney Posner According to this article from The Washington Post with Bloomberg, in February, House Financial Services Committee Chair Jeb Hensarling and three other House members (Scott Garrett of New Jersey, Bill Huizenga of Michigan, and Ed Royce of California) sent a letter to SEC Chair Mary Jo White urging […]
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