TheCorporateCounsel.net

On Friday, state intervenors in the litigation over the SEC’s climate disclosure rule filed a motion to hold the case in abeyance. The motion resulted from the Commission’s recent withdrawal from defending its rule. When the SEC officially dropped its defense, Commissioner Crenshaw objected to the decision on procedural grounds. Her point, basically, was that the SEC Commissioners must follow an administrative process to undo the agency’s rules, not just sit back, “rooting for the demise of this rule, while they eat popcorn on the sidelines.” She stated:

If the agency chooses not to defend that rule, then it should ask the court to stay the litigation while the agency comes up with a rule that it is prepared to defend (be it by rescission or otherwise, but certainly in accordance with APA mandates). At the very least, if the court continues without the Commission’s participation, it should appoint counsel to do what the agency will not – vigorously advocate in the litigation on behalf of investors, issuers and the markets.

So now, someone other than the SEC has asked the court to suspend the litigation – the 18 states that had previously intervened to defend the rule. This September 2024 explainer from the NYU School of Law about the role of states as amici and intervenors points to litigation over the Affordable Care Act as an example of state intervenors keeping a rule alive after the government dropped its defense due to a change in administration. It also reminds me of how the National Association of Manufacturers, as an intervenor, is the only party still defending the SEC’s 2020 proxy advisor rules.

At this point, the states in this case have simply requested the court to pause litigation until the SEC determines what action it will take on the rules (the motion also asks the court to direct the SEC to file status reports every 90 days). It’s not clear yet whether the court will grant that motion. And given other priorities and limited resources, I’m not holding my breath for the SEC to come up with an alternative rule that it’s prepared to defend.

– Liz Dunshee