Business Roundtable v. SEC: The Short Term Strategy

The SEC should appeal this decision.  At a minimum, it should seek en banc review by the entire circuit.  There are nine active judges on the circuit.  It would require five judges to vote in favor.  See DC Circuit Rule 35. En Banc Determination.  The SEC would be unlikely to get the five votes since the three on the panel opinion in Business Roundtable v. SEC would be unlikely to favor review of their decision by the entire circuit.  In other words, the SEC would have to get something approaching unanimity from the other judges on the court.  Nonetheless, if en banc review is denied, the SEC lost nothing in seeking review.

The risk, of course, is that the court will take the case and affirm and issue a decision that is entitled to greater weight than the panel opinion.  That is not likely.  The entire circuit is not likely to buy off on all of the reasoning contained in the panel opinion.  Forcing the SEC to choose among studies or analyze the impact of the rule on unions will probably not receive majority support (and, at a minimum, will likely spur a loud dissent).  To the extent the SEC loses but the reasoning is narrowed, the agency wins for two reasons.

First, it eases what the agency must do when it reconsiders access.  Right now, the standards set out in the panel opinion are open ended and impossible to meet on any objective basis.  There will always be other studies that the SEC did not arguably consider or other costs that were not adequately weighed, particularly for a requirement that has never gone into effect.  With no actual empirical evidence one way or another, the economic analysis will always involve some degree of conjecture and the conjecture can always be disputed.

Second, if the en banc court takes the case and narrows the reasoning, it will better frame the issue for the US Supreme Court.  Judge Ginsburg made a point in the panel opinion of citing two other cases where the SEC has been reversed in recent years for failing to adequately develop the record (with both opinions written by members of the panel in Business Roundtable v. SEC).  Rather than show the SEC's incompetence, as was the purpose of the citations, they illustrate how much the DC Circuit has routinely invaded the administrative function and substituted its views for that of the agency. 

The Supreme Court has dealt with this sort of thing before.  In Vermont Yankee, the Court put a stop to efforts by the DC Circuit to rewrite the process rule in the APA.  In Chevron, the Court objected to appellate courts substituting their views for that of the agency.

This is no guarantee that the SEC would win in the Supreme Court.  But by doing nothing, the agency allows the DC Circuit to impose more and more onerous standards on the rulemaking process, particularly on rules designed to alter the corporate governance process.