Chamber of Com of the USA v. SEC, 85 F.4th 760

Background

The SEC adopted the Share Repurchase Disclosure Modernization Rule requiring issuers to (1) disclose the issuer’s reason for repurchasing shares (rationale-disclosure) and (2) collect day-by-day repurchase data and file it quarterly (daily-disclosure).
Petitioners (U.S. Chamber of Commerce, Longview Chamber, Texas Association of Business) challenged the final rule on three main grounds: First Amendment compelled-speech (rationale-disclosure), APA arbitrary-and-capricious rulemaking (cost–benefit analysis and failure to consider comments), and inadequate opportunity for public comment.
The SEC’s rulemaking relied largely on qualitative economic assessment; the agency solicited comment and expressly invited data to quantify costs and benefits. Petitioners submitted concrete suggestions pointing to existing datasets and empirical methods the SEC could use, which the SEC did not address in the final rule.
The SEC argued Zauderer applies (allowing compelled factual commercial disclosures), defended its qualitative analysis as permissible, and maintained the comment period and process were adequate.
The Fifth Circuit held Zauderer applies and upheld the rationale-disclosure requirement as meeting Zauderer’s standards, but found the SEC acted arbitrarily and capriciously by failing to respond to petitioners’ quantification suggestions and by inadequately substantiating the rule’s claimed benefits; the court remanded for the SEC to remedy defects within 30 days. The court rejected petitioners’ notice-and-comment challenge.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Does the rationale-disclosure requirement violate the First Amendment by compelling speech?	Compelled explanations of repurchase motives are opinionated and not "purely factual and uncontroversial," so Zauderer should not apply.	Zauderer governs compelled commercial disclosures of factual, uncontroversial information; requiring a company to "explain the reason" for an action is factual and permissible.	Zauderer applies; the rationale-disclosure requirement is reasonably related to a legitimate interest and not unduly burdensome, so it passes Zauderer.
2. Must the SEC quantitatively analyze economic effects (i.e., is a quantitative cost–benefit analysis always required)?	Statutes require the SEC to determine economic implications, so it must quantify costs/benefits whenever feasible.	The SEC need only provide a reasonable, explained analysis; qualitative analysis is permissible where supported.	No blanket quantitative requirement; the SEC may rely on qualitative analysis but must reasonably explain and justify its approach.
3. Did the SEC act arbitrarily and capriciously by failing to respond to petitioners’ comments and by inadequately substantiating benefits?	The SEC ignored petitioners’ concrete suggestions and existing data that could quantify the rule’s effects; the agency failed to substantiate that opportunistic buybacks are a material problem and that price-discovery benefits exist.	The SEC said commenters did not identify specific usable data and that some costs/benefits were not quantifiable.	The SEC acted arbitrarily and capriciously: it failed to consider/respond to petitioners’ quantification suggestions and inadequately substantiated the rule’s primary benefits; remand ordered to remedy defects.
4. Was the notice-and-comment process deficient (comment period too short)?	The initial 45-day comment period was too short to allow meaningful participation.	The APA requires at least 30 days and the period was adequate; reopening later addressed issues.	The court found the notice-and-comment process adequate under the APA.

Key Cases Cited

Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626 (1985) (compelled commercial disclosures of factual, uncontroversial information may be required if reasonably related to a legitimate interest and not unduly burdensome)
Nat’l Inst. of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018) (limits on Zauderer where compelled disclosures involve controversial ideological speech)
NetChoice, L.L.C. v. Paxton, 49 F.4th 439 (5th Cir. 2022) (explaining Zauderer applies to mandated explanations of companies’ actions; disclosures can be "purely factual and uncontroversial")
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious standard for agency rulemaking)
FCC v. Prometheus Radio Project, 141 S. Ct. 1150 (2021) (agencies must respond to significant comments and cannot ignore contrary evidence)
Chamber of Commerce of the United States v. SEC, 412 F.3d 133 (D.C. Cir. 2005) (agency must reasonably determine economic implications; cannot stop analysis without justification)
Business Roundtable v. SEC, 647 F.3d 1144 (D.C. Cir. 2011) (agency must quantify certain costs or explain why quantification is infeasible)