The Securities and Exchange Commission (SEC)’s March 27, 2025 decision (the Decision) to withdraw the defense of its landmark climate-related disclosure rules adopted in March of 2024 (the Rules) did not formally pause or terminate the ongoing litigation.
On April 4, 2025, a group of 18 intervening states and the District of Columbia filed a Motion to Hold Case in Abeyance (the Motion) in Iowa v. SEC, which is the consolidated litigation challenging the Rules. The Motion requests that the Eighth Circuit Court of Appeals temporarily pause or delay the legal proceedings, given the uncertainty raised by the Decision. On April 14, 2025, the state of Iowa filed a consolidated opposition to the Motion on behalf of the petitioners.
If the Eighth Circuit denies the Motion, and barring any other circumstances changing the status quo, the Court will likely move forward with the litigation and decide to uphold the Rules or set them aside in whole or in part.
Below, we explore three different possibilities for the future of the Rules and the outcome of the litigation in light of recent developments.
Scenario one: Eighth Circuit grants the Motion. If the Eighth Circuit grants the states’ Motion, the litigation would pause, putting the Rules in a period of stasis and leaving open the possibility that they could be made active again under a future administration. In the intervening period, the Trump Administration SEC will likely continue to voluntarily stay the Rules. The intervening parties seeking this outcome are Massachusetts, the District of Columbia, Arizona, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.
Scenario two: Eighth Circuit denies the Motion. Alternatively, the Eighth Circuit could deny the Motion and proceed with deciding the case – it could hold oral arguments from the petitioners (the SEC stated it would yield its oral argument time), decide the case on the papers submitted, or remand the case. The intervening parties may, and are likely to, defend the Rules in the absence of the SEC’s defense.
This scenario would be the preferred outcome for the petitioners and, likely, the SEC. As mentioned previously, the petitioners opposed the Motion on April 14, 2025, and the SEC simply responded to the intervening states’ request for consent stating that “the position of the Commission in the pending proceedings is stated in the March 27, 2025 letter to the Clerk of Court.” The petitioners’ opposition to the Motion notes that the Court’s two best options are:
1. Hold argument on the fully briefed case, allowing the parties to split time as needed to fully discuss the challenge to the Rule; or, 2. Submit the case without argument and issue a decision or order holding the rule unlawful on the merits and vacating it.
From this posture, the petitioners and the SEC likely believe that the Eighth Circuit will provide them a favorable decision that the Rules impermissibly exceed the SEC’s authority.
Of course, it is uncertain under which basis the Eighth Circuit would decide the case. The SEC’s March 27 letter to the Clerk of Court notes that, in light of the SEC’s withdrawal of its defense of the Rules, “the Court would not need to reach the petitioners’ challenges based on the First Amendment or non-delegation doctrine if it sets the Rules aside on other grounds.” However, the Eighth Circuit maintains discretion to address any issues raised by the case.
If the Eighth Circuit holds that the Rules exceed the SEC’s authority, a new administration would be unable to propose and adopt similar rules, and such a ruling could result in a permanent limitation on the SEC’s powers, particularly if the decision was upheld by the Supreme Court.
Alternatively, it is possible that the Eighth Circuit upholds the Rules, or upholds them in part, in which case the SEC would need to take further action to formally rescind the Rules.
Scenario three: Rescission under the Administrative Procedure Act. One potential outcome, which could occur regardless of the outcome of the litigation itself, would be that the SEC will formally rescind or amend the Rules under the Administrative Procedure Act (APA). The intervening states seem to support this path forward – their Motion argues that “if the SEC aims to rescind or amend the Rules… it may do so via notice-and-comment rulemaking, as the APA requires… But it may not achieve that end by cryptically ‘withdraw[ing] its defense’ in this litigation.”
As discussed in our previous alert, Section 553 of the APA requires agencies to conduct a notice-and-comment process, during which an agency seeking to effectuate, rescind, or amend a rule must first publish a Notice of Proposed Rulemaking (NPRM) in the Federal Register and provide an opportunity for the public to comment on the proposal. This comment period is typically 30–60 days. Once this period closes, the agency must consider the public’s feedback and address substantive comments before finalizing the rule.
This approach has three major downsides from the SEC’s perspective. First, the process would be lengthy and require additional SEC staff resources to review and take public feedback into consideration. Second, APA-based rescissions lack permanence, and a future administration could reintroduce similar regulations. This “ping-pong” effect occurred with the definition of “waters of the United States” under the Clean Water Act, which was repeatedly revised between 2015 and 2023. Finally, any decision by SEC to stay the Rules in part, or amend them, may be subject to further judicial scrutiny, which may be more challenging for agencies under the 2024 Loper Bright decision.
Takeaways for companies
While it is clear that the Trump Administration will not enforce the Rules, they have not been repealed at this time, and the Rules technically remain law, albeit voluntarily stayed by the SEC since April 2024. The future of the Rules remains uncertain, and under several potential scenarios, the Rules – or a variation thereof – could be revived by a future administration. Companies are encouraged to stay up to date on the status of the Rules and the litigation.
Additionally, as we mentioned in our previous blog post, climate-related matters may represent information that is “material” to shareholders and should be evaluated on a case-by-case basis for inclusion in public company filings. In addition, disclosure of climate-related financial risks and greenhouse gas emissions information may be required under international or state laws, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD); California’s SB-253, the Climate Corporate Data Accountability Act; California’s SB-261, the Climate-Related Financial Risk Act; or similar laws passed by other US states.
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