TheCorporateCounsel.net

It’s probably not an understatement to characterize many of the decisions issued by the SCOTUS in its recently completed term as “momentous” – but it may not have occurred to companies to think about the potential impact of some of those decisions when preparing risk factor disclosure for upcoming SEC filings. A recent Bryan Cave blog highlighting matters that companies should consider when preparing their second quarter 10-Q points out the potential risk factor implications of the Court’s decisions limiting the authority of federal agencies:

The recent Supreme Court term produced several landmark decisions affecting administrative agencies, including:

– Loper Bright Enterprises v. Raimondo – ending long-standing “Chevron” deference to administrative agency interpretations and requiring courts to exercise their judgment in deciding whether an agency has acted within its statutory authority, such as when determining the meaning of ambiguous statutes.

– Corner Post, Inc. v. Board of Governors, FRS – allowing “facial challenges” of regulations governed by the Administrative Procedure Act within six years after “injury” – even if more than six years after the regulation became effective and where the plaintiff was newly-created specifically to challenge the regulation.

– Ohio v. EPA – among other things, faulting EPA for failing to provide a “reasoned response” to certain comments viewed by the agency as not significant or pertinent when adopting final regulations under an arbitrary and capricious review.

The effect of these decisions will play out over time as litigation develops, with some commenters predicting “hundreds and hundreds of challenges to very old rules”. Companies that operate in regulated industries, as well as those that rely on established regulatory environments, should evaluate potential risks of future challenges to agency rules or interpretations – particularly by competitors that operate at a regulatory disadvantage. Note that some regulations may not be vulnerable under Corner Post because they governed by statutes with their own distinct limitations provisions.

The blog also recommends that companies consider the potential implications of elections in the United States and Europe when drafting risk factor disclosure. In addition to its commentary on risk factors, the blog also reminds companies of their disclosure obligations with respect to trading plans and the need to review director nomination bylaws in light of pending litigation in Delaware.

– John Jenkins