The federal government wants to make sure that the judge in a Wisconsin case involving the Department of Labor’s ESG rule knows about its recent victory in a federal court in Texas.
In a “notice of supplemental authority,” the Department of Justice has brought to the attention of a federal district court in Wisconsin the results of its recent win in a suit brought by 26 Attorneys General in a federal district court.
The Wisconsin Case
The move is no doubt intended to improve its chance of prevailing in a separate suit filed about a month after that Texas suit, specifically one brought in the U.S. District Court for the Eastern District of Wisconsin by participants Richard Braun (Operations Manager for SWAT Environmental, a soil, water, and air technologies company that provides radon mitigation and other services), and Frederick Luehrs III (a Maintenance Supervisor at Petron Corporation, a supplier of engineered lubricants, in New Berlin, Wisconsin)—both of whom participate in the respective defined contribution plans of their employers.
Despite the differences in venue (Wisconsin, rather than Texas), the arguments are much the same—and in many respects (as did the Texas suit) focus more on the more provocative positioning in the proposed regulation,[i] than on the actual final regulation—and in the push toward a greater consideration of ESG factors (notably environmental) overall.
The Texas Case
Just last week, Judge Matthew J. Kacsmaryk ruled that the implementation process and provisions in the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights regulation neither exceeded the authority of the Labor Department, nor that of the Administrative Procedures Act.
As for that notice (Braun v. Walsh, E.D. Wis., No. 2:23-cv-00234, notice of supplemental authority filed 9/22/23), the Department of Justice filing says simply:
Defendant hereby respectfully notifies the Court of the opinion and order issued on September 21, 2023 in Utah v. Walsh, No. 23-cv -16 (N.D. Tex.), granting summary judgment in favor of Defendants Julie A. Su, in her official capacity as Acting Secretary of Labor, and the U.S. Department of Labor. The court there determined that the Final Rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, 87 Fed. Reg. 73822 (Dec. 1, 2022)—the rule Plaintiffs challenge here—was neither in excess of statutory authority nor arbitrary or capricious under the Administrative Procedure Act. The opinion is attached hereto and available online at Utah v. Walsh, 2023 U.S. Dist. LEXIS 168696 (N.D. Tex. Sept. 21, 2023). Dated: September 22, 2023.
What’s Next?
We’ll see what Chief Judge Pamela Pepper of the U.S. District Court for the Eastern District of Wisconsin—set to rule on a motion by those participants to temporarily restrain the Labor Department from enforcing the regulation—has to say on the matter.
[i] Noting that the so-called ESG rule “stems from a broader executive initiative,” the suit (Braun v. Walsh, E.D. Wis., No. 2:23-cv-00234, complaint filed 2/21/23) states that “…Congress never granted President Biden the authority to override ERISA’s text and its stated objective to protect retirees in favor of progressive policy dreams like social credit scores, reducing pay for CEOs, or instituting racial quotas for corporate boards.” More precisely, the plaintiffs state that “the ESG Rule violates ERISA and exceeds the authority granted to the Secretary by statute. In addition, it unlawfully politicizes the retirement system and, in doing so, puts the retirement savings of millions of Americans at substantial risk in service of a policy choice not found in ERISA or otherwise enacted by Congress.”
