Jane Luxton, Paul Kisslinger Co-Author Law360 Analysis On Corporate Disclosures and the First Amendment

Washington, D.C. (February 14, 2024) - Washington, D.C. Managing Partner Jane Luxton and Partner Paul Kisslinger recently co-authored an analysis for Law360 exploring the intersection of the First Amendment and corporate disclosure provisions requiring corporations to convey information.

In the article, titled "The Corporate Disclosure Tug-of-War's Free Speech Issues," Ms. Luxton and Mr. Kisslinger - along with their co-author, Lewis & Clark Law School J.D. recipient Colin Pohlman - examine a pending Missouri federal court case that challenges the state's rules requiring financial services professionals to specifically disclose if they "incorporate[] a social objective or other nonfinancial objective into a discretionary investment decision," while contextualizing the case in the broader debate over the free-speech implications of such disclosure rules.

The co-authors point out that mandatory corporate disclosures occupy a "confusing space," in the First Amendment arena, "particularly where those disclosures intersect with flash points in the ongoing culture wars, like environmental, social and governance, and diversity, equity and inclusion initiatives." They delve into the history behind the proliferation of these disclosure requirements, which are often tied to specific social or political objectives.

Turning to the legal implications, Ms. Luxton, Mr. Kisslinger, and Mr. Pohlman observe that these mandatory disclosure requirements are more susceptible to First Amendment challenges "if they are 'inextricably intertwined' with noncommercial, controversial, or opinion-based speech or bear a speculative connection to the government's interest."

According to the article, in the Missouri case in question - Securities Industry and Financial Markets Association v. Ashcroft - the federal district court recently held that "SIFMA adequately allege[d] that" Missouri's rules for financial services professionals "'violate the First Amendment' because the compelled disclosure about the use of ESG-related criteria is not purely factual but rather controversial 'because the Rules' required scripts express only one side of a debate over the merits of 'social objectives' [when] investing.'"

The co-authors conclude that, as "tensions around corporate disclosures relating to ESG and DEI continue to rise," "some jurisdictions legislate to require additional ESG- and DEI-related disclosures, others take steps to signal their rejection of these disclosure schemes — sometimes through their own disclosure requirements."

"Amid this tug-of-war, important questions of free speech and the scope of the First Amendment continue to play out in litigation over required disclosures," the article states. "In the meantime, public companies should work to ensure that their disclosures take careful account of this evolving area of the law."

Ms. Luxton is co-chair of Lewis Brisbois' Government Investigations & White Collar Defense Practice, chair of the Administrative Law & Regulatory Practice, and co-chair of the Sustainability and Environmental, Social, and Governance (ESG) Practice. Ms. Luxton has extensive experience in environmental as well as other federal regulatory, policy, and litigation matters. She advises businesses, associations, and coalitions in navigating all levels of the federal regulatory process, including appellate advocacy.

Mr. Kisslinger is chair of the firm’s SEC Enforcement & Litigation Practice, co-chair of the firm's Securities Class Action Defense Practice, and member of the Government Investigation & White Collar, Complex Business & Commercial Litigation, and Securities Litigation & FINRA Practices. He has extensive experience in the private and public sectors successfully guiding clients through the choppy waters of regulatory enforcement actions brought by securities and other financial services regulators, internal and external investigations, and legislative inquiries.

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