By Anne Sherry, J.D.
The Fifth Circuit granted a request to stay the SEC’s climate risk disclosure regulation. The brief unpublished order does not give any reason for the decision to grant the stay, but its issuance signals that the court saw merit in the challenge. A lottery will be held soon to determine which appeals court will hear the various petitions against the rule (Liberty Energy, Incorporated v. SEC, March 15, 2024, per curiam).
The stay itself is likely to have little practical effect on companies due to the long compliance horizon in the rule, which doesn’t require reporting until 2026 at the earliest. The petitioners had argued, however, that they would need to begin compliance measures immediately in order to be ready to collect the required data.
The stay is also vulnerable to being lifted or revised by another court. So far, petitions for review of the climate rule have been filed in not just the Fifth but also the Eighth, Eleventh, and District of Columbia Circuits. Under 28 U.S.C. § 2112, when petitions are filed in multiple courts in the first 10 days of a rule, the Judicial Panel on Multidistrict Litigation randomly draws one of those courts to review the consolidated petitions. In this case, that ten-day period expires at the end of Monday, March 18.
The real import of the stay is as a signifier that the Fifth Circuit sees merit in the petitioners’ arguments.
The court could have denied the motion for stay on procedural grounds. For example, Federal Rule of Appellate Procedure 18 states in part that “A petitioner must ordinarily move first before the agency for a stay pending review of its decision or order.” The SEC argued that it had not been given a chance to address the arguments for staying the final rule, but the challengers countered that they had requested a stay of the proposal back in 2022. The appeals court may have been satisfied that this request, as the petitioners argued, “easily satisfies FRAP 18.”
The petitioners also argued that they were likely to succeed on the merits of their challenge because the rule triggers the major-questions doctrine, lacks clear statutory authority, is arbitrary and capricious, and fails First Amendment scrutiny. As to that last point, the SEC’s conflict minerals disclosure rule was gutted through legal challenges largely grounded in First Amendment arguments.
The case is No. 24-60109.