As we have previously reported, several industry groups have filed petitions in the 5th, 6th and 11th circuits seeking to "vacate, enjoin and set aside" the Final Rule on the grounds that it "is arbitrary, capricious, and an abuse of discretion, ... unsupported by substantial evidence, .... based on determinations that 'precluded disclosure of disputed material facts which w[ere] necessary for fair determination . . . of the rulemaking proceeding taken as a whole,' .... and in excess of the Commission's statutory authority, in violation of the U.S. Constitution."  Phew .... that's some serious fightin words!  It is unclear how and when the circuits will rule on the petitions, whether the effective date(s) of the Final Rule may be stayed pending final adjudication by any of these courts, or whether they may be consolidated into one action given their almost identically worded challenges based on Commissioner Holyoak's scathing 13 page dissent.  We just dunno, but stay tuned!

 

Meanwhile, on Capitol Hill... since the Final Rule was deemed a "major rule" in April by ALJ Foelak under the Congressional Review Act (estimated to impact the economy by more than $100 MM), it is subject to review by both houses of Congress, which could result in a "joint resolution of disapproval," effectively gutting the Rule.  We previously covered this process in detail here, but briefly, the CRA requires the Government Accountability Office to report to Congress on whether an agency, in promulgating a major rule, has complied with the Administrative Procedure Act.  GAO's report must be made to each house of Congress no later than 15 calendar days after a rule's submission to Congress or its publication in the FR, whichever is later.  While we now know the date of publication in the FR, we dont know whether and when the Final Rule was submitted to Congress, which would impact the timing of GAO's report to Congress.

 

Once Congress receives the GAO's report, it has 60 calendar days to review the Final Rule and decide whether to allow it to go into effect or reject it.  Here's where it gets really interesting and reminiscent of a tension-filled West Wing episode (remember Toby and Josh walking and talking all Sorkin-style through the WH!).  As the clock on Congress's time to review GAO's report relies on the later of the Final Rule going to Congress and its publication in the FR, given the January 3, 2025 swearing in date of the 119th Congress, it is possible the combination of the incoming Republican leadership of both chambers and the new administration's disdain for all-things-agency could result in the Final Rule receiving a chilly (at best) reception on Capitol Hill and possible rejection.  As above, stay tuned...it will be interesting, for sure.

 

In the meantime, we advise all companies subject to the Final Rule to be prepared for it to go through as scheduled.  Got questions?  Let's talk!

 

Cobalt LLP