STATE OF UTAH V. MICONE, NO. 2:23-CV-00016 – FEDERAL COURT UPHOLDS DEPARTMENT OF LABOR’S “ESG” RULE, WHICH MANY INVESTORS VALUE.

On February 14, U.S. District Judge Matthew J. Kacsmaryk upheld, for a second time, a pro-investor Department of Labor (DOL) rule. The rule allowed those selecting retirement plan options for retirement savers to the consider environmental, social, and corporate governance (ESG) features of the investments.  The plaintiffs, a coalition of Republican-led states, argued that ERISA’s duty of loyalty was a “categorical prophylactic that bars collateral considerations.” But Judge Kacsmaryk held that a fiduciary acts “in full accord with his ERISA duty of loyalty when he chooses between investment options that all are valid options because they each maximize the beneficiaries’ financial benefits.”

Judge Kacsmaryk previously upheld the rule under the Chevron doctrine, which required judges to defer to agency interpretations of ambiguous statutes.  However, after the Supreme Court overruled Chevron, the Fifth Circuit sent the case back to Judge Kacsmaryk to reconsider his earlier decision.  In his second opinion, the judge not only sustained the rule again but also appropriately read the Supreme Court’s ruling in Loper Bright Enterprises — which abolished the Chevron doctrine — narrowly.  The case is an important example of how rules can survive court challenges even in the post-Loper era.  And it preserves an important rule that many investors supported, allowing their retirement plan administrators to consider the ESG factors in investment planning.

TRUMP ADMINISTRATION PAUSES OR ABANDONS IMPORTANT LITIGATION, STEPS THAT WILL HURT MARKETS, INVESTORS, AND CONSUMERS.

In numerous cases pending in federal courts around the country, the Trump Administration has paused or abandoned enforcement actions and cases involving challenges to agency rules.  It signals that agencies will no longer seek to defend important rules adopted to protect investors and consumers, and that they will no longer seek to hold companies accountable for violating the law and abusing consumers.   Here are examples of important cases that have been paused or withdrawn in recent weeks:

• State of Iowa v. SEC, No. 24-1522 (8th Cir.) – In March 2024, the SEC under the prior administration adopted a rule requiring public companies to disclose material information about the climate-related risks they face and ways in which companies are addressing those risks. The rule was challenged by a number of states and other parties, in a series of cases consolidated in the Eighth Circuit.  On February 11, 2025, the SEC filed a letter with the court essentially asking the court to put the case on hold.  The letter attached a statement from SEC Acting Chairman Mark Uyeda explaining that he had “directed the Commission staff to . . . request that the Court not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases,” presumably with an eye toward abandoning defense of the rule.
• Coinbase, Inc. v. SEC, 25-145 (2d Cir.) – On June 6, 2023, the SEC under the prior administration filed an enforcement action alleging widespread violations of the securities laws by Coinbase in its sale of crypto securities. The district court held largely in favor of the SEC and Coinbase lodged an appeal.  However, on February 14, 2025, the SEC filed a motion seeking to delay its response to Coinbase’s petition for permission to appeal.  Moreover, in late February, Coinbase stated on its website and in a regulatory filing that it had reached an agreement with the SEC to have the SEC’s lawsuit withdrawn against the company without any financial penalty.  In a similar case, SEC v. Binance, No. 1:23-cv-01599 (D.D.C.), the SEC and Binance have recently filed a joint motion asking for a 60-day stay in the case, signifying a likely dismissal.
• National Association of Private Fund Managers v. SEC, No. 25-10218 (5th Cir.) – On February 6, 2024, the SEC under the prior administration issued a rule requiring greater oversight of firms that engage in significant securities trading, including trading in U.S. treasury securities. The rule was challenged by industry interests and a district court in Texas nullified the rule.  The SEC appealed to the Fifth Circuit.  However, on February 19, 2025, the new SEC moved to voluntarily dismiss its appeal, thus ensuring that the rule has no chance of being restored through the litigation.
• American Council of Life Insurers v. DOL, No. 24-10890 (5th Circuit) – On April 23, 2024, the DOL under the prior administration adopted a strong rule aimed at protecting retirement savers from bad investment advice that costs them billions of dollars a year. The rule was challenged in two Texas district courts, which stayed the rule pending the litigation.  The DOL under the prior administration appealed those rulings to the Fifth Circuit.  However, on February 11, the DOL filed a motion to pause its appeals.  The court granted that motion “to allow new DOL officials sufficient time to become familiar with the issues in these cases and determine how they wish to proceed.”  The defense of another important rule is thus likely being abandoned.
• CFPB v. Solo Funds, Inc., 2:24-cv-04108-RGK-AJR (C.D. California) – In May of 2024, the CFPB brought an enforcement action against Solo Funds, Inc., a fintech company that promotes small-dollar, short-term loans. The CFPB alleged that SoLo was violating the law by, for example, falsely touting no-interest loans when, in fact, consumers are routinely subject to fees that result in an exorbitant total cost of credit. However, on February 21, the parties filed a joint stipulation of dismissal, thus ending another effort by the CFPB to hold a company accountable for allegedly abusing consumers.