Briefs Supporting the SEC Climate-Change Disclosure Rules Commit Serious Errors (Part 1)
How Flawed Premises Undermine the Amicus Briefs Backing the SEC’s Climate Rules
Various parties have challenged the validity of the SEC’s climate-change disclosure rules. A critical question for the Court is whether statutes allowing the SEC to impose disclosure obligations authorized the new rules. I filed an amicus curiae brief joined by the Cato Institute arguing that the SEC lacked statutory authority.
The SEC filed a brief arguing that the climate-change disclosure rules are standard, traditional disclosures about a company’s business, value, and risks that the SEC has had the authority to issue and has issued for decades. Several amicus curiae briefs support the SEC.
Statutory interpretation is not scientific. Reasonable lawyers can reach different conclusions about the meaning of a statute, but they should not do so from inaccurate or unreliable premises. When a statutory interpretation has a flawed starting point, the conclusion is questionable, and that is a problem with arguments in the brief from the SEC and briefs from SEC supporters.
Here are two examples. Future posts will discuss other weaknesses in the briefs on the SEC side.
One amicus brief, from scholars and former SEC officials, argued that the legislative history of the Securities Act supported the Commission’s authority to adopt the climate-change disclosure rules (7-9). The scholar amici brief discussed the text of a Senate bill and testimony about that Senate bill.
The argument was built on a flawed understanding about the legislative history of the Securities Act. The Senate bill was not the primary basis for the Securities Act. The primary basis was a bill in the House sponsored by Representative Sam Rayburn and drafted by Felix Frankfurter, James Landis, Benjamin Cohen, and Thomas Corcoran.[1]
The statute in the Securities Act that the SEC cited to support the climate-change disclosure rules originated in the House bill and not the Senate bill. My amicus brief reported legislative history of the House bill confirming restrictions on the power of an administering agency over disclosures. As a result, the legislative history argument about the Securities Act in the scholar amici brief should not carry much weight with the Court.
A second example is from the SEC brief and some supporting amicus briefs. Those briefs found support for the new climate-change disclosure rules in the SEC rules from the 1970s requiring disclosure of certain environmental matters. The scholar amici brief asserted over and over again that the SEC used authority in the Securities Act and the Exchange Act “to mandate disclosure on environmental matters since the Nixon Administration” (1; also 2, 14, 21). An amicus brief from the Americans for Financial Reform Education Fund and several environmental groups took the same position (6-7). The SEC had power to issue the climate-change disclosure rules because the SEC had and used power under the main securities acts to require environmental disclosures as far back as the 1970s (SEC brief 9-10, 34-35).
The briefs did not tell the Court about a critical distinction. In the 1970s, the SEC had a specific statutory mandate from Congress for the environmental disclosures, the National Environmental Policy Act of 1969. The SEC did not have special statutory authority for the climate-change disclosure rules.
NEPA made all the difference. In 1975, the SEC said it would not have issued any rules on environmental disclosures if Congress had not enacted NEPA. The Commission concluded that “although it is generally not authorized to consider the promotion of social goals unrelated to the objectives of the federal securities laws, it is authorized and required by the National Environmental Policy Act of 1969 (NEPA) to consider the promotion of environmental protection as a factor in exercising its rulemaking authority under the” Securities Act and Exchange Act.[2]
That difference means that the earlier SEC disclosure rules on environmental matters are precedent against, and not precedent in favor of, the SEC’s authority for the recent climate-change disclosure rules. On a legal question depending totally on the existence or not of statutory authority, the importance of NEPA as statutory authority for the SEC disclosure decisions in the 1970s seems to be relevant. The SEC brief and the brief from the environmental groups did not mention NEPA to the Court, which is difficult to understand. The scholar amici brief mentioned it but nonetheless stressed that, for fifty years, the SEC used its authority under the Securities Act and the Exchange Act to require disclosures related to the environment (21).
The Court has reason to be cautious of statements in briefs supporting the SEC’s legal authority to adopt the climate-change disclosure rules. The judges should look carefully at legal sources cited in the briefs.
[1] See Joel Seligman, The Transformation of Wall Street 56-57, 61-63, 69 (3d ed. 2003) (House bill would be the basis of the negotiation in the conference committee); James M. Landis, The Legislative History of the Securities Act of 1933, 28 Geo. Wash. L. Rev. 29, 33, 34, 45 (1959) (“the House bill would become the basic draft” in the conference committee); Raymond Moley, After Seven Years 183 (1939) (House bill substituted for Senate bill in conference committee).
[2] SEC, Environmental and Social Disclosure, 40 Fed. Reg. 51656 (Nov. 6, 1975).
Andrew N. Vollmer is a distinguished senior fellow with the Mercatus Center at George Mason University; former deputy general counsel of the Securities and Exchange Commission; former professor of law, general faculty, at the University of Virginia School of Law; former partner in the securities enforcement group of Wilmer Cutler Pickering Hale and Dorr LLP.