Today, the Fifth Circuit Court of Appeals issued an administrative stay of the SEC's recent climate disclosure rule, which was issued last Wednesday, March 6, 2024. The unpublished order by a three judge panel (Jones, Higginson, and Wilson, a majority of whom were appointed by Republican presidents) does not provide any legal reasoning, but rather simply states that the petitioners' "motion for an administrative stay is granted."
The impact of this order is immediate. The applicability and enforcement of the SEC's climate disclosure rule is stayed until the Fifth Circuit Court of Appeals can review whether it passes muster on a constitutional and statutory basis. But it is also important not to overstate the impact of this ruling--the Fifth Circuit has not held that the SEC's climate disclosure rule is improper or unconstitutional. Instead, that determination will be made at a future date following more extensive legal proceedings.
Notably, the petition for review filed in this Fifth Circuit case (by a pair of energy companies) features the arguments against the SEC climate disclosure rule that have been previewed by public comments and the Republican SEC Commissioners: that (1) the "rule violates the major questions doctrine"; (2) the "rule is arbitrary and capricious and is not supported by substantial evidence"; and (3) the "rule violates the First Amendment." It is likely that these arguments will be the focus of subsequent briefing, and a court opinion addressing the applicability of these legal arguments to this SEC rule will likely have an impact beyond the immediate issue at hand, and influence future regulations.
Due to the proliferation of lawsuits challenging the SEC climate disclosure rule, in several different Courts of Appeal (Second, Fifth, Sixth, Eighth, Eleventh, D.C.), it is unclear what the next procedural steps will be, as any of these Courts of Appeal may ultimately hear the challenge to the SEC climate disclosure rule. But until a court rules on the validity of that legal challenge, the SEC climate disclosure rule has been stayed by the Fifth Circuit.
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