Written by Daniel Wisner
(Reuters) – An impending U.S. Supreme Court ruling that could limit the regulatory power of federal agencies could lead to President Joe Biden's administration's rules allowing socially sensitive investments by employee retirement plans. Republican-led states could play a key role in challenging the bill. Documents submitted to court.
Twenty-six states, led by Utah and Texas, asked a federal appeals court late Thursday whether to block the U.S. Department of Labor's rule until the U.S. Supreme Court makes a decision on the agency's powers, expected by the end of June. We asked them to wait for the decision.
The Supreme Court heard arguments Wednesday in a dispute involving a government-run program to monitor overfishing of herring off the coast of New England. The two fishing companies asked the justices to refer to a 1984 Supreme Court precedent (a doctrine known as “Chevron Difference”) that required judges to follow reasonable federal interpretations of U.S. laws deemed ambiguous. They called for restrictions or overturning.
U.S. District Judge Matthew Kacsmarik of Texas, who is presiding over a case challenging the investment rules, said in September that U.S. law governing retirement plans requires retirement plans to consider environmental, social, and corporate governance (ESG) factors in investment decisions. He said it was unclear whether the factors could be taken into account. .
Kaczmarik said the Labor Department's position that plans can consider these factors is reasonable as long as they prioritize traditional financial considerations, and declined to block the rule pending the outcome of the lawsuit. He said he did.
The states filed briefs Thursday asking the New Orleans-based U.S. Court of Appeals for the 5th Circuit to overturn Kaczmalik's decision. They said Chevron's deference does not apply to this case because federal law clearly requires retirement plans to act “solely and exclusively” in the financial interests of participants. .
But if the Fifth Circuit finds otherwise, the states should wait for the Supreme Court to decide Chevron's fate before making a decision, the states said in their filings.
States say the rules unfairly incorporate political agendas into investment decisions and affect the retirement savings of hundreds of millions of people. A subsidiary of Liberty Energy and an oil and gas industry group are also plaintiffs in the lawsuit.
The rules, finalized in November 2023, cover plans to invest a total of $12 trillion for more than 150 million people. This removed restrictions adopted by the administration of former Republican President Donald Trump on considering ESG factors in investment decisions.
Critics of ESG investing, including many Republicans, argue that ESG investing advances liberal political and social agendas at the expense of plan participants and shareholders who may suffer financial losses as a result. It is claimed that there is.
The U.S. Department of Justice, which defends ESG rules, did not respond to requests for comment.
The states' briefs are an early example of how overriding Chevron's deference could have far-reaching implications by making it harder for federal agencies to defend their rules in court.
Pushing for the repeal of this doctrine seeks to weaken the bureaucracy of federal agencies that interpret laws, create rules, and enforce executive actions, reducing the power of what they call the “administrative state.” It's part of a broader effort by conservatives and pro-business groups to rein it in. .
The Supreme Court delivered a major victory for the movement in 2022, ruling that the power to adopt policies involving “serious issues” with broad societal implications is reserved to Congress, not federal agencies. did.
The Biden administration asked the Supreme Court to uphold Chevron's deference, arguing that the doctrine recognizes the need for government agencies to “bridge the gap” when the law is ambiguous.
Questions posed by the justices during Wednesday's arguments did not indicate a clear majority in favor of overturning Chevron's deference. Some conservative justices in the court's 6-3 majority expressed skepticism about the doctrine's continued effect, while others expressed reluctance to overturn it. .
(Reporting by Daniel Wisner in Albany, New York; Editing by Will Dunham and Alexia Garamfalvy)