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Those who follow the ups and downs of SEC rulemaking will no doubt note that it was the Fifth Circuit Court of Appeals which vacated the SEC’s share repurchase disclosure rules late last year, based on a determination that the SEC acted arbitrarily and capriciously, in violation of the Administrative Procedure Act, when the SEC failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis. As you may recall, that litigation in the Fifth Circuit moved very quickly from adoption of the final rules in May 2023 to an order by the court directing the SEC to address the petitioners’ claims by October 2023, ultimately resulting in vacatur when the agency failed to timely respond to the court’s October order. I think everyone was surprised by the sheer speed with which the court acted in the case of the share repurchase rules, having observed litigation over SEC rulemaking plod through the courts for years in many cases (for example, consider the conflict minerals disclosure requirements).

One interesting thing for me about this whole situation is that I can distinctly remember the days when the US Court of Appeals for the District of Columbia Circuit was the court that often determined the outcome of challenges to SEC rules. That court has historically heard the most challenges to administrative agency actions. Given its unique position as the court with jurisdiction over the district where the bulk of federal law is created, the Court of Appeals for the DC Circuit was often seen as the go-to arbiter of the administrative state. I am certainly no appellate law scholar, but I suspect those days may be either waning or gone, because in recent years we have observed a certain element of “forum shopping” activity on the part of petitioners, who appear to be seeking what they believe to be more “friendly” jurisdictions that could potentially be more amenable to vacating the SEC’s rulemaking actions.

While a lot of ink has been spilled and oxygen expended by talking heads in the week and a half since the climate disclosure rules were adopted, I don’t believe that too many companies were already rushing out to the begin their compliance efforts with respect to the new rules. In many respects, I do not think that the Fifth Circuit’s stay will change much in terms of anticipated compliance efforts, because we still do not have any clarity as to how all of this litigation will play out. In this regard, I often point out the example of the challenge to the SEC’s conflict minerals disclosure rule, which was litigated for years with an ultimate result of a very much gutted, but still in effect, disclosure requirement. So, for now at least, I advise that you keep your “pencils up” in mapping out how to comply with the new climate disclosure requirements!

We will have much more to say on this topic next week during our webcast “The SEC’s Climate Disclosure Rules: Preparing for the New Regime.” The webcast takes place on Wednesday, March 27 at 2:00 pm Eastern and I will be joined by J. T. Ho from Orrick, Rose Pierson from Chevron and Kristina Wyatt from Persefoni to provide insight into the new disclosure requirements and practical advice on how to build the disclosure infrastructure required to comply with the new rules. Note that members of this site are able to attend this critical webcast at no charge. If you’re not yet a member, subscribe now. The webcast cost for non-members is $595. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.

– Dave Lynn