Staff Reports
The latest legal skirmish over the Biden administration’s radical push to let retirement plans prioritize woke environmental, social, and corporate governance (ESG) policies is heating up. The 5th U.S. Circuit Court of Appeals in New Orleans, known for its conservative leanings, is about to hear arguments challenging a Department of Labor rule. This case, brought by 25 GOP-led states, will be one of the first substantial tests for federal regulations in the new judicial era, post-Chevron deference.
For those blissfully unaware of the Chevron doctrine, the 1984 Supreme Court ruling allowed courts to uphold federal agency interpretations of vaguely worded laws reflexively. Last year, U.S. District Judge Matthew Kacsmaryk upheld this rule, relying on good ol’ Chevron. But in a new twist, the Supreme Court recently shook things up with its ruling in Loper Bright Enterprises v. Raimondo, essentially telling lower courts they no longer need to defer to federal agencies like obedient lapdogs.
GOP states challenging ESG investing rule tees up first post-Chevron test https://t.co/2FJUVC7nQR
— Washington Examiner (@dcexaminer) July 8, 2024
The issue at hand? Whether the 1974 Employee Retirement Income Security Act (ERISA) actually permits ESG factors to influence investment decisions over basic, hard cash incentives. The Labor Department’s rule permits retirement plans to use ESG considerations as a “tiebreaker” only if these factors don’t negatively impact the risk or return of the investment. Seems harmless, but Republican states see it as a stealthy way for the Biden administration to sneak politically-charged climate and social agendas into the financial decisions affecting $12 trillion worth of retirement assets.
In the wake of the Supreme Court’s ruling, the states, spearheaded by Utah, pounced on this newfound opportunity. They’ve argued that without Chevron in play, the ESG rule under the Administrative Procedure Act doesn’t stand a chance. According to Utah’s attorneys, the Labor Department’s changing interpretations of ERISA have been anything but consistent and far from legally sound.
To further stack the deck, the case will be heard by a trio of conservative judges, each handpicked by Republican presidents. The 5th Circuit has already built a reputation for scrutinizing agency deference more aggressively, giving the Republican states a fighting chance to knock out a rule they believe jeopardizes the financial futures of American retirees for the sake of ideology.
So, while the Left dreams of a world where investment decisions are driven by political correctness and climate hysteria, conservatives can take solace as the courts begin to dismantle yet another overreach by the Biden administration. Don’t pack away that popcorn just yet—this showdown in the 5th Circuit could be the start of a very winding legal road.
