Kevin L. Walsh, Washington-based principal at Groom Law Group, said in a phone interview that the ruling may impact how the DOL will continue its recent emphasis on rule-making based on ERISA Section 404(a) on fiduciary responsibility.
“One might say in light of this new Supreme Court precedent, a duty to act prudently doesn’t give the DOL the authority to craft new substantive responsibilities,” Mr. Walsh said.
Dennis M. Kelleher, co-founder, president and CEO at Washington-based non-profit Better Markets, said in a phone interview that the ruling should not have much impact on the SEC because the agency does ground its rule-making in specific statutory authorizations.
He noted, however, the SEC and other agencies will have to tread more carefully in how they present those rules.
They will have to “make much more explicit what they are proposing to do how clearly and closely their rule-making it tied to statutory authority. They will do it to a greater extent in the future to try and forestall baseless legal challenges.”
Despite that, Mr. Kelleher foresees a greater number of such challenges ahead. Even though the EPA created its emissions rule and cited the Clean Air Act’s statute that empowers the agency to “devise the best system for emissions reduction,” Chief Justice John G. Roberts Jr. said in the opinion that in “certain extraordinary cases” something more than merely plausible textual basis is necessary to support specific regulations, Mr. Kelleher said.
In other words, Mr. Kelleher said, while the EPA followed the major questions doctrine, “that’s not good enough” for the court majority.
“Every corporate securities lawyer representing corporate America is going to tailor their arguments against the SEC rules to the analysis put forth in the EPA case,” Mr. Kelleher said. He added specifically that SEC climate rules will definitely see a significant uptick in the volume of legal challenges ahead.
Andrew L. Oringer, a New York-based partner in the ERISA and executive compensation group at Dechert LLP, said in an email that the specifics of the Supreme Court case could make it so the decision would not be expected to apply for ERISA purposes.
“I do, however, think that the case increasing judicial hostility towards deference to administrative agencies, and Justice Gorsuch’s dissent, not surprisingly, is additional evidence of that,” Mr. Oringer said. “Indeed, the DOL did get caught up in that trend with the Fifth Circuit’s rejection of the amended fiduciary rule in the Chamber of Commerce decision, which was allowed to stand by the Trump administration. But, in terms of specific applicability of the EPA case under ERISA, I suspect that the factual details in the EPA case could make that unlikely. “
New York City Comptroller Brad Lander said in a news release June 30 said the decision “undermines the federal government’s ability to set critical standards for meaningful reductions in our greenhouse gas (GHG) emissions and to provide for a just transition to a low-carbon economy.”
Mr. Lander, the fiduciary for the five pension funds in the $265.9 New York City Retirement Systems, said “We cannot confront the scale of the risks the climate crisis poses to our communities and the global economy without strong, concerted action by both the federal government and the private sector.”