On July 24, 2025, ISS and Glass, Lewis filed separate complaints in the District Court for the Western District of Texas challenging Senate Bill 2337, signed into law by Texas Governor Greg Abbott on June 20, 2025. The law -- "An Act relating to the regulation of the provision of proxy advisory services" -- goes into effect on September 1, 2025. The law imposes certain disclosure obligations on proxy advisors if they consider non-financial factors (such as sustainability, social or governance issues) when they provide proxy voting recommendations or in the provision of proxy advisory services.
Glass, Lewis, in its complaint, asserts that "[w]henever Glass Lewis' speech reflects certain viewpoints disfavored by the government, the Act compels Glass Lewis to broadcast the government's contrary viewpoint and publicly condemn itself: Glass Lewis must tell its clients that its services are 'not being provided solely in the financial interest of the company's shareholders' and 'conspicuously disclose' this warning on the firm's website homepage." Complaint, Glass, Lewis & Co., LLC v Paxton, (W.D. Tex.) (No. 25-cv-01153) (July 24, 2025).
ISS, in its complaint, asserts that that the law "impos[es] onerous requirements on proxy advisers who provide recommendations to their clients based on investment objectives that Texas apparently disfavors – and slaps severe civil penalties on advisers who do not comply with the law's byzantine (and vague) requirements." Complaint, Institutional Shareholder Services Inc.v Paxton, (W.D. Tex.) (No. 25-cv-01160) (July 24, 2025).
In seeking declaratory and injunctive relief, both Glass, Lewis and ISS assert that the law is unconstitutional and subject to preemption. Both argue, among other things, that the law engages in content-based discrimination, viewpoint discrimination and compels specific speech. They both also argue that the law is void for vagueness and subject to express and implied federal preemption. Glass, Lewis also asserts that the law burdens interstate commerce by "requiring out-of-state proxy advisers to give out-of-state shareholders time-consuming, expensive, and distracting disclosures about companies that need not even be incorporated in Texas" in violation of the Dormant Commerce Clause. ISS also argues that the law "substantially impairs ISS' contractual relationships with its customers without any legitimate purpose" in violation of the Contracts Clause.
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