I recently blogged about how back in June, Texas passed a law – known as “Senate Bill 2337” – that mandates certain disclosures when proxy advisors recommend casting a vote for “non-financial reasons” or provide conflicting advice to multiple clients. I noted that the law takes effect on September 1st – and that ISS and Glass Lewis had filed lawsuits trying to block the new law.
Judge Albright of the U.S. District Court for the Western District of Texas did just that last Friday, entering a preliminary injunction. The judge’s ruling blocks enforcement of SB 2337 by the Texas Attorney General against ISS and Glass Lewis for now – the cases proceed to discovery and trial, which has been set for February 2nd.
Here’s a few things to note:
1. Limited Scope of Injunction: The ruling blocks the Texas Attorney General from enforcing SB 2337 against ISS and Glass Lewis. It doesn’t bar enforcement actions brought by private plaintiffs, nor does it extend protections to other proxy advisors.
2. Injunction Based on Likely Merits: During Friday’s hearing, Judge Albright found that ISS and Glass Lewis met the legal standard for injunctive relief, citing potential harm and likelihood of success on the merits. A written order from the judge is expected soon.
3. Possible Appeal and Future Proceedings: The Attorney General may appeal to the Fifth Circuit for an emergency stay. If successful, the injunction could be lifted before the February 2nd trial date.
4. Potential Impact for the 2026 Proxy Season: If SB 2337 is upheld, proxy advisors would face significant new disclosure and procedural obligations. If struck down, the current federal-only regulatory framework would remain in place.
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