One of the recurring problems in consumer protection is the way government officials so often use their powers to push special interest policy preferences and serve political allies rather than everyday consumers. Look no further than reports that the Securities and Exchange Commission, under its new, Biden-appointed chairman Gary Gensler, is preparing to mandate disclosures by public companies regarding climate change and other so-called environmental, social, and corporate governance (ESG) issues.
Setting aside the question of whether these disclosures have real value in the greater debate over climate change and whether it makes sense to mandate them for all companies, the most obvious outcome of any new S.E.C. mandate will be the thump of lawsuits hitting court dockets and the jingle of shareholder money flowing into the pockets of the trial lawyers who just happened to play a major role in getting President Biden into the White House.
Remember that just last month the Supreme Court left the door open to class actions over even generic corporate statements in securities filings. The case—Goldman Sachs Group v. Arkansas Teacher Retirement System—involved “generic statements” by Goldman Sachs “about its ability to manage conflicts.” The trial lawyers’ theory in the case was that “these statements were false or misleading—and caused Goldman’s stock to trade at artificially inflated levels—because Goldman had in fact engaged in several allegedly conflicted transactions without disclosing the conflicts.” The Supreme Court talked about properly weighing the generic nature of statements but did not foreclose securities claims over generic statements like the ones by Goldman Sachs.
With this opinion in hand, trial lawyers are going to be salivating over mandated ESG statements. Even before the Goldman Sachs opinion, trial lawyers were building up the case’s importance and linking it to corporate ESG commitments and related lawsuits. For example, just before the Goldman Sachs decision, trial lawyers from the Motley Rice law firm penned a joint op-ed to highlight the case, encourage more ESG litigation, and emphasize “that ESG is having a proverbial moment,” “[s]ocial awareness and activism seem to be at all-time highs,” and against that backdrop “ESG litigation amounts to good public policy with public relations incentives.”
This should be no surprise, as trial lawyers are well versed in harnessing climate and government bureaucrats to make money. Remember that trial lawyers were the ones who did a nationwide roadshow to sell cities like New York and Baltimore on a legal assault against the largest oil companies in an effort to, as one Court recently put it, recover “damages caused by those companies’ admittedly legal commercial conduct in producing and selling fossil fuels around the world.” The goal from those cases was plain: cripple the nation’s energy companies while imposing radical climate policy through the courts. And the trial lawyers pitching the cases locked in a healthy payday to the tune of about 25% of any judgment or settlement.
And lest you think that it might give the Biden administration pause to see trial lawyers cashing in on new government mandates without any direct benefit to consumers, remember that trial lawyers give millions to liberal political groups and were a major part of the big-money coalition that put President Biden in the White House. Motley Rice, home of the recent ESG op-ed, is home to only about a hundred lawyers but was responsible for over $2.5 million in federal giving alone over the past two election cycles, which represents about $25,000 per lawyer and was enough to put its lead partner, Joe Rice, into the running as a Biden ambassadorial candidate. And don’t forget that the President’s brother, Frank Biden, was flown to the inauguration by the Morgan & Morgan private jet, the law firm that is famous for its ubiquitous billboards and was responsible for over $4 million in federal political contributions from 2017-2020, sending money to the Democratic National Committee and Biden campaign efforts, as well as political committees with ties to Chuck Schumer and Nancy Pelosi.
There is plenty of real fraud that affects consumers and investors, which makes this impending ESG boondoggle by the Biden-led S.E.C. particularly disheartening for consumer advocates. Government regulators should be focusing on stopping fraudsters, preventing scams, and returning money to defrauded consumers and investors. It will be a real shame if the S.E.C., instead of taking up the mantel for consumers, follows through on ESG efforts that will mostly serve to funnel money to political allies.