A U.S. appeals court on Thursday ordered a Texas judge to reconsider his decision upholding a Biden administration rule that allows socially conscious investing by employee retirement plans, in light of a major recent Supreme Court ruling.
A group of 25 Republican-led states and oil drilling company Liberty Energy are suing to block the U.S Department of Labor rule. U.S. District Judge Matthew Kacsmaryk in Amarillo, Texas, in September declined to block it, and the states and Liberty appealed.
Kacsmaryk’s decision cited 40-year-old legal doctrine known as Chevron deference, which required courts to defer to agencies’ interpretations of unclear laws they enforced.
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However, the U.S. Supreme Court last month eliminated Chevron deference, saying courts should instead use their independent judgment in deciding whether agency rules are valid, significantly curtailing federal agencies’ rulemaking power.
A three-judge panel of the 5th U.S. Circuit Court of Appeals on Thursday said Kacsmaryk must now decide the case without Chevron deference, but left the rule in place for now.
The rule, which took effect in February 2023, allows 401(k) and other plans to consider environmental, social, and corporate governance (ESG) factors as a “tiebreaker” between two or more financially equal investment options. It replaced a Trump administration rule that barred plans from considering any non-financial factors.
The offices of the Attorneys General of Texas and Utah, which led the states’ challenge, Liberty, and the Department of Labor did not immediately respond to requests for comment.
(Reporting By Brendan Pierson in New York; Editing by Chris Reese)
