May 2, 2024
Litigation Continues for Proxy Advisor Rule
This Cooley PubCo blog discusses the latest development in the now five-year-long saga involving the SEC’s proxy advisor rulemaking. In February, Liz shared that a federal district court had ruled in favor of ISS in its lawsuit challenging the SEC’s 2020 rule that would have subjected proxy advisors to enhanced regulations by saying they engage in the “solicitation” of proxies. She noted that the National Association of Manufacturers was considering an appeal.
The Cooley blog says that both NAM and the SEC have now filed notices of appeal. “NAM first on April 16, with the SEC following a week later on April 23. Subsequently, the clerk of the DC Circuit filed an order consolidating the two appeals and setting out a schedule for various submissions by the parties.”
The blog highlights that the SEC and NAM are head-to-head in another lawsuit involving the same rulemaking.
As noted above, in this case brought by ISS, NAM favored the 2020 amendments, which led it to intervene on the side of the SEC (and also to its becoming a defendant). It may be a little head-spinning, but NAM also has a separate case challenging the proxy advisor rules against the SEC before the Fifth Circuit. In July 2022, NAM filed a complaint against the SEC, asking that the 2022 amendments to the proxy advisor rules—which, as noted above, reversed some of the key provisions in the 2020 rules, including the company-favorable condition that would have required company engagement—be set aside under the APA and declared unlawful and void. In September, NAM filed a motion for summary judgment, characterizing the case as “a study in capricious agency action.”
In December 2022, the Federal District Court for the Western District of Texas issued an Order granting summary judgment to the SEC and Gensler and denying summary judgment to NAM in that litigation. (See this PubCo post.) NAM appealed, and in August 2023, a three-judge panel of the Fifth Circuit heard oral argument on NAM’s appeal.
Since that case is ongoing and a decision has yet to be issued, the blog notes that the two opposing parties, SEC and NAM, in a brief moment of concurrence roundtable, jointly advised the Court of their appeals in the ISS litigation.
– Meredith Ervine