Multiple legal challenges have already been launched against the SEC’s new climate change disclosure rules. Plaintiffs include Attorneys General from several states, a large business trade organization and a private energy company. To date, these suits span across six different federal courts, and the array of these challenges is expected to trigger a lottery process in which one court would handle a consolidated case addressing all the claims.

Two interesting developments last week include a temporary stay of the rules by the U.S. Court of Appeals for the Fifth Circuit in response to a petition by an energy company, and a lawsuit by environmental group Sierra Club seeking to broaden rather than invalidate the new rules.

In March 2022, the SEC published proposed climate change disclosure rules that would require, among other things, the disclosure of certain emissions-related information, categorized in three tiers: Scope 1, Scope 2 and Scope 3 emissions. Scope 1 emissions are direct emissions from sources owned or controlled by a reporting company; Scope 2 emissions are indirect emissions from electricity, steam, heat and cooling purchased by the reporting company and Scope 3 emissions are upstream and downstream emissions by the reporting company’s third-party vendors, customers and the like. The rules as adopted in 2024 retained Scope 1 and 2 disclosure requirements for some of the covered public companies, but dropped requirements for Scope 3 disclosures.

The Sierra Club in its challenge seeks to broaden the scope of the new rules, rather than invalidate them. Filing in the D.C. Circuit, the Sierra Club has asked for a review of the rules to determine whether the Scope 3 emissions reporting requirements were improperly excluded from the final rule.

On March 15th, 2024, the Fifth Circuit granted a temporary stay of the rules pending its consideration of the energy company’s request for a permanent stay that would last for the course of the litigation. Inasmuch as the rules are not effective yet and will not require additional disclosure until reporting companies’ 2026 fiscal years, when companies file annual reports for their 2025 fiscal years, the court’s grant of the temporary stay could signal its disposition toward granting a longer stay, but of course the ultimate outcome remains uncertain.

While more challenges to the new rules are anticipated, companies should continue to focus on their internal procedures and related operational adjustments necessary to comply with the new rules’ mandate. It is at this stage far from clear that any of the challenges will result in either a long-term stay of effectiveness of the new rules or outright invalidation before they take effect. We will continue to monitor current and future challenges to keep public companies, investors and the public at large apprised as to developments.

Photo of Wilderness Castillo-Dobson Wilderness Castillo-Dobson

Wilderness Castillo-Dobson is an associate in the Corporate Department and a member of the Capital Markets Group.

Wilderness earned his J.D. at the George Washington University Law School, where he was the recipient of the Pro Bono Service Award for outstanding work in…

Wilderness Castillo-Dobson is an associate in the Corporate Department and a member of the Capital Markets Group.

Wilderness earned his J.D. at the George Washington University Law School, where he was the recipient of the Pro Bono Service Award for outstanding work in the public interest. While in law school, Wilderness served as a student attorney at Rising for Justice’s Housing Advocacy and Litigation Clinic in Washington D.C., and worked as a law clerk at both the U.S. Office of Special Counsel’s Hatch Act Division and the Federal Trade Commission’s Consumer Protection Bureau. Wilderness received his B.A. from New Mexico State University.

Wilderness maintains an active pro bono practice focusing primarily on housing justice and court reform. Wilderness currently serves as a Co-Chair to the Implementation Committee of the Pandemic Practice’s Working Group, a sub-section of the Chief Judge’s Commission to Re-Imagine the Future of NY Courts, where he assists in efforts to modernize and improve access to justice throughout the New York state court system.

Photo of Marina Edwards Marina Edwards

Marina Edwards is a law clerk in the Corporate Department and a member of the Capital Markets Group.

Photo of Louis Rambo Louis Rambo

Louis Rambo is an associate in the Corporate Department and a member of the Capital Markets Group. He concentrates his practice on regulatory matters under the federal securities laws and advises companies on general corporate and transactional issues, including public disclosure, federal and…

Louis Rambo is an associate in the Corporate Department and a member of the Capital Markets Group. He concentrates his practice on regulatory matters under the federal securities laws and advises companies on general corporate and transactional issues, including public disclosure, federal and state proxy requirements, debt and equity securities transactions, business combinations and corporate and board governance. Prior to joining the Firm, Louis served as an attorney in the division of corporation finance with the Securities and Exchange Commission.

Photo of Jonathan Richman Jonathan Richman

Jonathan Richman represents a variety of companies in securities class actions, shareholder derivative actions, internal investigations, SEC investigations, corporate governance, insider trading, D&O insurance and related matters. Many of those matters involve international elements, including representations of non-U.S. issuers in U.S. litigation and…

Jonathan Richman represents a variety of companies in securities class actions, shareholder derivative actions, internal investigations, SEC investigations, corporate governance, insider trading, D&O insurance and related matters. Many of those matters involve international elements, including representations of non-U.S. issuers in U.S. litigation and in landmark non-U.S. collective settlements under Dutch law in the Netherlands. Jonathan’s clients have included Hewlett Packard, Royal Dutch/Shell, Zurich Insurance Group, Halliburton, and Waste Management.

Jonathan writes extensively on topics ranging from securities and insider-trading law, corporate governance and fiduciary issues to non-U.S. law on collective actions. His articles have been published in major legal publications.

Jonathan is the immediate past co-head of the Firm’s Securities Litigation Group and is currently co-head of the Firm’s Asset Management Group. Before joining Proskauer, Jonathan was a partner at Dewey & LeBoeuf LLP, where he was co-head of the Securities, M&A and Corporate Governance Litigation Practice Group.

Photo of Frank Zarb Frank Zarb

Frank Zarb is a partner in the Corporate Department, where he concentrates his practice on regulatory matters under the U.S. federal securities laws, as well as on equity finance transactions regulated under those laws.

He counsels public and private companies, broker-dealers, hedge funds…

Frank Zarb is a partner in the Corporate Department, where he concentrates his practice on regulatory matters under the U.S. federal securities laws, as well as on equity finance transactions regulated under those laws.

He counsels public and private companies, broker-dealers, hedge funds, as well as other investors, on a wide range of transactional and securities regulatory compliance matters