The Securities and Exchange Commission has received a venue to take on the bevy of legal challenges filed to its climate risk disclosure rule, with all of the cases against the rule being consolidated into the U.S. Eighth Circuit Court of Appeals.
The SEC finalized the rule March 6 at a Commission meeting — with pared-down greenhouse gas emissions reporting requirements — and lawsuits quickly ensued, as experts expected. The agency eliminated proposed requirements for companies to disclose scope 3 emissions and limited the universe of companies it would require scope 1 and 2 disclosures for, however the rule’s detractors, nor all its supporters, were fully appeased.
The agency’s rule faced a total of nine challenges in six circuit courts of appeals, though four cases filed into the Fifth Circuit of Appeals were consolidated into one challenge. This case was filed by Liberty Energy before separate suits from three Gulf Coast states, two Big Oil trade groups and the U.S. Chamber of Commerce got added to the case. The Fifth Circuit issued a temporary halt on the rule pending review earlier this month, prior to the reassignment of cases to the Eighth Circuit.
In total, 25 states have signed on to lawsuits to block the rule. Of them, only the Commonwealth of Kentucky has a Democratic governor, though its attorney general and both General Assembly chambers are led by Republicans.
An SEC spokesperson declined to comment for this story, but an agency spokesperson previously told ESG Dive the SEC “will vigorously defend the final climate risk disclosure rules in court.”
While the courts are taking on the rule, Congressional Republicans have threatened to overturn the rule using the Congressional Review Act. To counter that threat, pro-ESG 501(c)4 Unlocking America’s Future began running advertisements in Arizona, Montana, Pennsylvania on Tuesday as part of a six-figure advertising campaign to protect the rule. The organization said it will run the ads — which asks viewers to urge their Congressional representatives to uphold the rule — in the three battleground states and Washington D.C. until there is no longer a CRA threat to the rule.
“The SEC is taking an important step to ensuring companies disclose crucial information about the risks they create for small business owners, farmers, and those saving for retirement,” UAF spokesperson Kyle Herrig said in the releases announcing the ad buys. “Americans should demand that Congress side with Americans, not wealthy CEOs who prioritize profits over people.”
With a venue selected, it’s time to take a look at all the legal challenges the agency faces.
Case: Iowa v. SEC — Filed: Eighth Circuit Court of Appeals
The state of Iowa was joined by eight other states and the American Free Enterprise Chamber of Commerce in filing the lawsuit that entered the Eighth Circuit into the lottery. The states of Arkansas, Idaho, Missouri, Montana, Nebraska, North Dakota, South Dakota and Utah all filed with the Hawkeye State on March 12.
The states argue for the rule to be vacated because they believe — like much of the opposition directed toward the regulation, both legal and public — it exceeds the SEC’s statutory authority. The states also allege the rule is “arbitrary and capricious, an abuse of discretion” and unlawful.
The circuit’s court had previously set a briefing schedule for both parties, requiring the SEC to deliver the administrative record for the rule April 22, the petitioners file their brief with the court May 6 and an agency response due 30 days after that brief is filed.
Case: Natural Resources Defense Council v. SEC — Filed: Second Circuit Court of Appeals
The Natural Resources Defense Council is one of two lawsuits focused on challenging the agency’s omission of stronger GHG emissions reporting requirements. NRDC filed its lawsuit against the agency in the New York-based Second Circuit of Appeals March 12, requesting a review of the rule.
The environmental group does not go into detail about the challenge in its petition. However, Tom Zimpleman, an NRDC senior attorney, told ESG Dive the petition was filed because while the final rule is “a step forward from the status quo,” it “leaves out important disclosures.”
“The rule can and should do more to provide investors with information that they need to manage climate-related financial risk,” Zimpleman said in an emailed statement.
Case: Liberty Energy v. SEC — Filed: Fifth Circuit Court of Appeals
Liberty Energy, a public oilfield services company, filed the most consequential lawsuit thus far. The case accounts for four of the agency’s challenges, as similar suits from Louisiana, Texas and Florida; the Texas Alliance of Energy Producers and Domestic Energy Producers Alliance; and the Chamber of Commerce, Texas Association of Business and the Longview Chamber of Commerce were consolidated.
The Fifth Circuit had granted a stay pending review, despite the SEC protesting in its filings that such immediate relief was not necessary at the time.
Case: Ohio Bureau of Workers’ Compensation v. SEC — Filed: Sixth Circuit Court of Appeals
Ohio attorney General Dave Yost filed suit on behalf of the state’s Bureau of Workers’ Compensation. He, along with the states of Tennessee and Kentucky and their attorneys general also allege the agency’s rule exceeds its rulemaking authority.
Yost said in a release, “The regulator of the stock market has no business setting environmental policy for the country.”
Case: Sierra Club v. SEC — Filed: D.C. Circuit Court of Appeals
The Sierra Club’s petition represented the first legal challenge to the agency’s slimmed GHG reporting requirements. While the environmental group looks to work to get the “arbitrary removal of key provisions” reversed, it is also looking to defend the SEC’s authority to promulgate the rule.
After announcing it was considering challenging the rule March 6, the group officially filed its petition March 13.
Case: West Virginia v. SEC — Filed: Eleventh Circuit of Appeals
West Virginia was quickest with its lawsuit, joined by nine other Republican-led states filing March 6, the same day the rule was finalized. The states allege the rule should be vacated because it is unlawful and exceeds the agency’s rulemaking authority.
Alabama, Alaska, Georgia, Indiana, New Hampshire, Oklahoma, South Carolina, Virginia and Wyoming joined West Virginia in the challenge.
