Climate Change Disclosures – How Regulatory Compliance Leads to Future Litigation Risks

Mandate disclosures relating to climate change represent a new trend in the U.S. and around the world. Recent additions to the climate change regulatory landscape include a new mandate by the SEC and three new laws enacted in California. These climate change provisions portend similar regulations at state and federal levels, as well as around the world. In this episode, Dorsey attorneys Brian Bell and Kayla Race explain the requirements and applicability of the SEC rules and California statutes with Dorsey attorney and podcast host Kent Schmidt. Learn what steps to take to ensure compliance, including the accuracy and completeness of the mandatory disclosures. The discussion also covers how a failure to comply with these climate-related obligations may lead to not only regulatory actions and penalties, but also litigation by shareholders, consumers, and other stakeholders.

This podcast is not legal advice and does not establish an attorney-client relationship or create any duty of Dorsey & Whitney LLP or those appearing in this podcast to anyone. Although we try to assure that the content of this podcast is accurate, comprehensive, and reflects current legal developments, we do not warrant or guarantee those things. The opinions expressed in this podcast are the opinions of those appearing in the podcast only and not those of Dorsey & Whitney. This podcast is considered attorney advertising under the applicable rules of certain states.

Transcript

Voiceover

[00:04] Welcome to another episode of the SharkCast on litigation risks management where we explore why businesses are so frequently sued, and how to mitigate and navigate the dangers lurking in these risky waters.  Join us now as we welcome our host Kent Schmidt, Litigation Partner at the law firm of Dorsey & Whitney.

Schmidt

[00:25] Thanks for joining us for another episode of SharkCast and I am very pleased to welcome to the show today two of my colleagues.  Brian Bell is a partner in our firm’s Minneapolis office where he practices in environmental regulatory law.  And Kayla Race is an associate in our firm’s Salt Lake office and she also practices in the area of environmental regulations.  They’re both in the environmental affairs group at Dorsey, and that is gonna be the topic of today’s podcast.  So first I’d like to welcome you both.  Brian where are you tuned in today?

Bell

[01:04] I’m calling from my office in Minneapolis.  Happy to be here.

Schmidt

[01:08] Alright, and I hope the weather is tolerable there.  Getting nicer…

Bell

[01:11] Very tolerable.

Schmidt

[01:12]…each week.  Okay, good, good, and Kayla, are you in Salt Lake today?

Race

[01:16] I am calling from my home in the mountains above Salt Lake.

Schmidt

[01:22] Well, again welcome to both of you, and I’d like to maybe set the table here with a few comments before we dig into some of the details.  One of the concepts that I talk about and write about from time to time, and you’ve heard on this podcast before is the correlation between new regulations and litigation risk.  Regulations can be a breeding ground for civil litigation far beyond perhaps what those that enacted the regulations might have initially envisioned.  So, here’s a sort of typical scenario, the government will enact some regulation and maybe they don’t want it to have a private right of action.  Maybe they expressly state that it has no private right of action.  That means no civil litigation is intended to necessarily to come from it, but instead the failure to comply with the regulation will trigger some administrative action.  Usually a penalty or some other consequence.  But in addition to that government regulation which naturally flows in the first instance, often there are new litigation risks that are created.  So, a plaintiff, a private plaintiff will come along and will point to the failure to comply with the regulation as either creating a private right of action as a predicate for another plane that has as an element of violation of federal law, or creating some standard of care, or something of that nature.  The best examples of this in California, is California Business and Professions Code, section 7200, one of the predicates of which is the violation of any statute or regulation, and so one of the things that we do a lot at Dorsey is we correspond with those in the regulatory group about new regulations that are coming online, and try to identify what the litigation risk are that are created by these regulations, and so it’s important for companies to think about compliance with the regulation, and also think about how the litigation landscape has changed.

Schmidt

[03:39] You know, another topic that we often talk about as well, which I think today’s conversation is going to illustrate, is the interesting scenario where California acts almost like a quasi federal government on the West Coast, like a separate federal government on the West Coast because California is so forward leaning, and so proactive, and so you have Washington, DC on the East Coast that’s promulgating new regulations, and you have Sacramento on the West Coast, by virtue of the size of California, the market share is often essentially regulating outside the state, and so we see that.  So before we get into the details of the regulations that we’re going to address today, just want to open up for thoughts and comments from Brian and Kayla on these concepts of regulations, and civil litigation risk, and/or California acting in a quasi federal fashion.

Bell

[04:39] Well, actually I mean, I think that the California acting in a quasi federal fashion is very timely and literal.  The US Court of Appeals for the DC Circuit, I think just today upheld California, the waiver that the Environmental Protection Agency granted to California to set its own tail pipe emissions limits, and electrical vehicle requirements, so essentially that, and then I think it allows other states to peg themselves to California, so in that instance, they quite literally are sort of acting as a secondary or adjunct to the federal government, enacting more stringent standards in the federal government that then other progressive states can tie on to.  So I think that’s true.  I think, also with respect to environmental laws in particular, is that there’s often citizen suits provisions within the environmental laws themselves that require compliance with, you know, different regulations, and obviously environmental law is heavily regulated and much of many of the standards happen at the Environmental Protection Agency.  When those standards become more stringent or tighter, or when additional, you know, substances might be added to the definition of hazardous substances.  For an example, you can have citizens themselves can sue private parties, in order for them to be compliant.  Now I think in a lot of these cases, although there may be some fee shifting, I think it’s less common that it’s plaintiffs lawyers like you’d see in maybe the consumer protection area, well it is plaintiffs lawyers, but it’s more advocacy groups and, you know the usual suspects, the Sierra Clubs, the National Resources Defense Counsel and folks like that and less, I would say class actions where you have a group of, you know, a plaintiffs firm getting a group of private land owners together to sue, that does happen, but that’s more on the, on the state tort level of environmental law, not at the federal level.  So, there are some, it is true, but there are some, I think, wrinkles on it that are a little bit unique to environmental law.

Schmidt

[06:54] Right, and a lot of times, we also see some of these California statutes struck down, Dormant Commerce Clause, other legal theories, preemption, things of that nature.  Kayla, you have some familiarity with that area of law, I’m sure, right?

Race

[07:08] Yeah.  I mean, there’s some lawsuits challenging the laws that we’re going to be talking about today, both the California laws and the SEC laws on bringing up their Commerce Clause challenges, First Amendment challenges to the rules, as well as challenges brought by environmental groups with the SEC rule, you know, challenging, saying that it’s not stringent enough, so you can get, in terms of challenging rules, you can get challenges on all sides, and I think that’s where those kind of groups and industries usually come in, but certainly you know, when you’re talking about enforcing rules versus challenging them, a lot of environmental laws do allow, as Brian said, allow for those citizens groups.  So if you have a Clean Air Act or a Clean Water Bio, Water Act violation, you know, harming individual properties or persons, you can, you can have lawsuits from individual land owners or folks in the area.

Schmidt

[08:11] So, there’s lots of correlations and connections between regulations and litigation.  Litigation of, seeking to enjoin the enforcement, litigation that comes from the regulations, consumer class actions, environmental interest groups, the litigation landscape is pretty extensive.

Race

[08:30] Oh, just particularly in California, where you have laws that create, effectively create private right of actions, where they otherwise don’t exist.

Schmidt

[08:39] Right.  Yeah, California leads the country on those private citizen lawsuits.  So Kayla, let’s begin with you, focusing on California and these new climate change regulations that we’d like to tackle today.  Can you give us an overview of what’s happening here in California, on climate change regulations?

Race

[09:01] Yeah, so California in October of 2023 passed three new laws that required disclosures of certain information, they’re not substantive in the traditional sense, they’re not requiring companies to reduce their emissions, or be more sustainable necessarily, but they require companies to disclose certain kinds of information.  So the first law is SB 253 requires large companies to disclose their greenhouse gas emissions to the California Air Resources Board on an annual basis, and that’s both direct and indirect emissions, and SB 261 requires large companies to disclose the financial risks that they face as a result of climate change, and then the third law, this is just the highest level overview for right now, and we can dive into the details, but the third law is AB 1305 and that requires certain disclosures.  If you sell or market voluntary carbon offsets in California, it requires disclosures about what those offset projects are, and it also requires disclosures, if you say that your company, or your products, or carbon neutral, or net zero emissions, or other kind of similar specific phrases, there are certain disclosures you have to make about how those statements are true.

Schmidt

[10:44] That’s a great overview.  Why don’t we tackle these one at a time?  And I believe the first that you mentioned was SB 253, which I believe is called the Climate Corporate Data Accountability Act.  Can you summarize that with a little more detail in terms of what does it require, to what entity is the report made, and the various requirements for third party attestation?

Race

[11:12] So, as SB 253 it is called the Climate Corporate Data Accountability Act.  I like to just call it the greenhouse gas emissions reporting law because that’s the better summary of what it is.  It applies to any company that is a U.S. company, regardless of what state you’re incorporated in, and you do business in California, which is not a defined term, and your annual revenue is at least a billion dollars, and that’s not annual revenue in California, that’s just annual revenue for that reporting entity, and so if it applies to you, if you meet that those thresholds of a billion dollars, and doing business in California, then you have to report to the California Area Sources Board your greenhouse gas emissions that are called scope one, two, and three which are your direct emissions from sources that you own or directly control, which might be if you have, you know, the kind of classic is like, if you own a you know a power plant or something, and that’s emitting, that’s got emissions coming right out of that pipe, that’s a very obvious one of your direct emissions in scope one, but it could also be any kind of gas powered vehicles that you own and operate for your business, things like that.  You also have to report your scope two emissions, which are your indirect emissions.  So, if you’re purchasing electricity from another entity, from your utility provider, you have to report the emissions associated with that, and then finally, the indirect emissions in scope three that you have to report are both your upstream and downstream emissions, everything and your kind of supply chain.  So emissions associated with products that you may be purchasing that you’re putting into something else, and also emissions associated with basically where your products are going or how they’re used, and so that very large category, and can be much more onerous to track down and measure.

Schmidt

[13:14] So Kayla, if I could just interject a question here, I think I’m guessing that the answer to this question is, it’s anywhere, emissions anywhere, but can you clarify whether it’s emissions in California, or emissions outside the state but within the US, or even emissions on the other side of the world?

Race

[13:36] It’s just a emissions for the reporting entity.  It’s not emissions that are emanating from California directly.  The emissions don’t have to, you know, be coming from some tailpipe that’s located in California, nor does your business have to be located in California to fall within the parameter of this law.

Schmidt

[14:00] Interesting.  What’s another example of California, not directly regulating, perhaps conduct that occurs outside the state, but essentially doing it in an indirect way by requiring disclosure, it reminds me of Prop 65, which doesn’t regulate exposure to carcinogens per se, but requires labels that warn you of the risk of getting cancer, and just by requiring those disclosures, seeks to nudge companies to make their products safer so they don’t have to put the disclosure on, and that, by virtue of California size, you know, implicates all sorts of business activity outside of, outside of the state.  Interesting pattern, I think that we’re seeing in California.

Race

[14:49] Yeah, I think the intent is probably twofold, one that you said is kind of if you get that information out there publicly, the hope is that companies will then voluntarily take action because of the way that might be perceived by their customers, and there might be more demand from their customers to be more sustainable, but the other intent could be that, you know, California has pretty aggressive climate change goals of, you know, reducing the statewide greenhouse gas emissions, and then getting more clean energy and whatnot, so this could be the first step in kind of measuring where the state is at, and then potentially passing more legislation and regulations down the road targeting specific industries, or specific kinds of activities to actually then reduce emissions.

Schmidt

[15:46] Yeah, I could envision that where, you know, a year from now, you start seeing amendments to these statutes that lower the threshold, expand the application, things of that nature.  These type of regulations are often amended frequently and promptly.  Well, let’s turn to the second law that you’ve identified, SB 261 that appears to relate primarily to climate related financial risk.  Can you describe the requirements of this regulation?

Race

[16:20] So this regulation, it applies in a similar way to the last one and that it has a financial threshold.  It only applies to companies that are, have over $500 million in in revenue instead of a billion, but it’s the same requirements of you got to do business in California for this to apply to you, and it requires companies to disclose their climate related financial risk, which is defined as any material risk of harm to immediate and long term financial outcomes due to the physical and transitional risk, which can include risks to your corporate operations, risks to your provision of goods and services, your supply chains, the health and safety of your employees, your capital investments, and other kinds of financial metrics.

Schmidt

[17:15] Is this also a report to the government or is it a different type of disclosure?

Race

[17:22] So this is actually just a report on your website rather than a report to the California Resources Board.

Schmidt

[17:32] So this is forward facing for consumers, investors, anyone that wants to decide whether to do business with the company I guess is the focus, right?

Race

[17:44] Exactly, but it’s not limited to publicly traded companies, for example, which is the case with the SEC rule that we’ll talk about a little later.  This is just any, so it’s, it is similar in that it is that kind of financial, or investor focused disclosures, you know, thinking about those financial risks that a company is facing, but any company, regardless of whether you’re public or private, as long as you meet that 500 million threshold and you’re doing business in California, you’re gonna have to make those disclosures.

Schmidt

[18:19] Interesting, now I don’t think we touched on earlier, but can you give us the dates on which these laws are going to go in effect and require the, first the government disclosure, and then the website disclosure?

Race

[18:33] So both of these laws are supposed to kick in in 2026.  The caveat is that SB 253, the greenhouse gas emissions reporting law, that requires the California Air Resources Board to first promulgate regulations, and they have not started on that as far as I know, they don’t have any rulemaking for this law on their website, so it’ll be interesting to see whether, whether CARB’s ends up actually promulgating regulations on time or not, but yeah.  So for the SB 253, there’s actually two different dates, 2026 for group one and two emissions, so you don’t start reporting group three emissions until 2027, but again, we’ll have to see what happens with the regulatory, with the rulemaking process and whether that stays on target.

Schmidt

[19:31] Interesting.  Before we turn to the SEC, let’s round off our discussion of the California statutes with the third and the trifecta here.  The Carbon Offset Law.  Can you just give us a brief overview of what is entailed in, I think it’s AB, Assembly Bill, 1305.

Race

[19:50] Yeah, exactly, and so yeah, and the title of this bill is focused on carbon offsets, but the substance of it really has two different focuses.  One is carbon offsets, but one is kind of sustainability marketing claims or greenwashing kind of claims.  So with carbon offset, so AB 1305 requires that any business entity, regardless of revenue, regardless of size, if you market or sell voluntary carbon offsets in California, then you have to make disclosures about those offsets, specifically about what are the projects behind the carbon offsets, what are the accountability measures that are being taken to ensure that project is actually reducing the emissions, or sequestering the emissions it says it’s going to, and certain information about your data and your calculation assets, and then the second prong of this law is that regardless of whether you’re doing anything with carbon offsets, if you are an entity that operates in California, and you make claims that you or your products have achieved net zero emissions, or you’re carbon neutral, or you have achieved significant reductions of greenhouse gases or carbon dioxide, then you have to report how such claims were determined to be accurate, if you have been making any progress towards goals that you’re saying you set, and if you have any kind of verification of those claims, you have to make disclosures about that and those disclosures simply need to be published on your website, but starting January one of next year.

Schmidt

[21:29] Well, that’s just around the corner, so I can see that second predicate being a basis for consumer class actions, if some of those disclosures turn out to be less than truthful, but we’ll save our discussion on litigation risk and how some of this may result in new litigation theories for a few moments for now.  Brian, let’s hear from you next.  Turning to the real federal government, not the quasi federal government in Sacramento, there’s been some activity on the SEC front, the Securities and Exchange Commission.  Can you explain what the new SEC rules are in this realm?

Bell

[22:10] Yes.  So some of this dates back to, not the rules themselves, but I think the origin of the rules date back to the Obama administration, where the Obama administration issued some guidance on what should be included in orderly and annual, or what could be included in quarterly and annual filings regarding GHG emissions.  This actually codifies that as requirements for certain filers that they disclose these climate related risks and emissions as part of their annual filings, which are of course filed both with the SEC, but then also included on the filers website, and so where it breaks down, I think what the most significant parts are is that most filers, and these are obviously publicly traded companies, have to disclose climate related risks that could materially impact the company, and so if a company may be particularly vulnerable to forest fires, or increased flooding, or something like that, that would be something that they would need to disclose if it was a material impact to their company.  They also have to discuss activities that are used to mitigate or adapt those material climate risk, and so what are they doing to, you know, limit the effects of higher temperatures, or increased precipitation, or increased drought, or however it might impact them, what, if anything, really are they doing to mitigate that, and that is really, again, all filers that have to engage in those activities.

Schmidt

[23:53] Brian, can I interject a question here, and maybe I’ll use an example to illustrate what I’m getting at.  Does it have to be something that is in any way caused by the public company that’s doing the disclosure?  For example, if you are a company that has a factory in Louisiana, that’s perhaps in the floodplain and during hurricane season, you’re obviously at great risk of facing flooding, is that a climate related risk?  Even if you are not doing anything that impacts the environment or the climate?

Bell

[24:28] Yes, exactly.  So there is no requirement that you have, you know some, in some way contribute to the climate risk.  It’s just that you are, for whatever reason based on your location or the industry that you’re in, may be negatively affected by climate change, because presumably regardless of whether you are actually contributing to climate change, it could affect your bottom line and your share price, and they want to know what, if anything, you’re doing to mitigate those risks or evaluate them.

Schmidt

[24:58] Right.  So with that clarification, it’s probably easier to try to identify the companies that do not face the material climate risk than to identify those that do because, you know, flooding, forest fires, everything in that category arguably creates this risk, and so better to disclose it than not disclose it.

Bell

[25:19] Yep, I would agree.  I mean, I would be hard pressed to think of a company that will, you know, say we have no climate related risks whatsoever.  I think really any company is going to have impacts to its property, or certainly companies are going to have, some will have more significant risks obviously than others, maybe more acute, but given the sort of global scope of climate change, it should impact, or will impact all companies, so I would expect all to have something to disclose with all of these.

Schmidt

[25:50] Well, it’s puzzling because you often have a situation where warnings are required, and then everyone, in order to avoid some regulatory activity or litigation risk, uses a warning or makes a warning, makes a disclosure, and it has the effect of negating the impact of the warning, and if an accounting firm for example, people that are in offices that are leased has to disclose climate related risk.  It will drown out those warnings that are truly more significant and elevated.  Is that a fair criticism of this type of broad warning requirement?

Bell

[26:27] Yeah, I mean, I think that’s true to an extent.  I think where what you’re discussing comes up, perhaps more would be, consumer disclosures like the Prop 65 disclosures that we sort of alluded to earlier, the idea here is that this will really be investors, you know, sophisticated institutional investors who might be looking at, you know, a natural resources company, or an energy company, and they will maybe do that deeper dive to say what exactly are they doing to help to mitigate these risks, but I do agree that a lot of what is said will probably just be sort of well spun fluff that the majority, if not the vast majority, will be in the category that you’re talking about where they lease space, even retailers, I mean certainly there’s threats to their supply chains and things like that, but some of it is so systemic, and kind of so significant that it’s hard to really say in any sort of concrete way how it’s going to be impacted.

Schmidt

[27:28] I guess that’s my concern, or my criticism of this is everyone’s going to put in their boilerplate language about climate risk, and it will have the effect when investors are looking at companies to invest in their reading their FCC filings to call their eyes to glaze over because oh yeah, I know what this is, instead of something that was narrower, that really is an elevated or particular risk.

Bell

[27:51] Yeah, and I think that that’s a good point, and I think that that is probably true for the vast majority of companies especially that these kind of climate related risks and activities to mitigate the risk will apply to, I mean again, activities to mitigate the risk is just going to be a lot of, you know, a word salad that at the end of it, you don’t really know, that’s everything to everyone and nothing to everyone, too so.

Schmidt

[28:17] And what’s the timeline for the SEC regulation going into effect, when did the first disclosures under this new rule have to be made?

Bell

[28:27] So, interesting you asked.  As of last Thursday, the Securities and Exchange Commission has stayed implementation of the rule.  There have been challenges from both proponents of the rule, opponents of the rule, and those have all been consolidated in the Eighth Circuit.  The opponents requested an emergency stay of the rule, before the court could act on that, the SEC voluntarily stayed the rule and so.  We don’t really know what the actual dates will be of when it’s required, but they’re generally staggered based on the reporting year, so I believe it is the, what are called accelerated filers, their first disclosures will be I believe two years after the rule goes into effect.  For the large accelerated filers, I believe it’s one year after the rules go into effect, but for different types of disclosures, whether it’s the GHG emissions for the large accelerated filers, and the accelerated filers, is different than their compliance schedule for disclosure on their financial statements regarding these risks that we were just talking about, so again, it’s really up in the air because we don’t know how long the litigation will be in place, but I’d say it’s at least two years off that the initial disclosure requirements will go into effect, and some may never of course go into effect.

Schmidt

[29:55] Do you think the decision by the SEC to voluntarily stay implementation of this is a good sign that they will do some more revision of the of the rule, maybe to meet some of the legal challenges, as well as to further consider some of the implications?

Bell

[30:12] I think that’s possible, though I think kind of, that may depend somewhat on what happens in November with the presidential election.  They may not want to go back to the drawing board before then, because if they do, they probably won’t have time, that would be like a voluntary remand, to make tweaks to the rule.  And they’re getting sued from each side, some are saying it doesn’t go far enough, some saying it goes too far, and so they’re certainly not going to be able to please everyone.  Could they actually voluntarily vacate and remand because they would only be potentially solving one side of the issue.  They can’t say, well, we’re both obviously going to make it narrower and more expansive because there is overlap in areas that are being challenged.  So the more conservative challengers are saying any emissions reporting is outside of the SEC’s jurisdiction, whereas the National Resources Defense Council, Sierra Club, are saying, well, they should have actually gone and included those phase three emissions.  Those value chain emissions, from use of your product, so, and you know, I’m just a humble environmental lawyer, so I don’t actually practice before the SEC, or deal with SEC regulations that much, but at least in the environmental realm, a voluntary stay like this is pretty uncommon.  I don’t know that I can say that I’ve ever seen the Environmental Protection Agency, Kayla, you may know differently, or the Department of the Interior doing a voluntary stay like this.  You know, especially because typically they want the rule to go into effect because even if they lose on appeal, sometimes industry has already made adjustments that the EPA was kind of tackling.

Schmidt

[31:50] Definitely a fascinating area to keep on top of, and as you indicated, the presidential election also provides an additional layer of intrigue on top of everything else.  Well, let’s just turn quickly to discussing how litigation claims can come from these laws, which are sure to be indications of where various state legislatures are going to be going, as well as various other federal government departments we talked about, in general, the risk of civil litigation, environmental group litigation, litigation that is related to the enforcement of these laws, but Kayla do you want to give us your thoughts on where particularly the California regulations that you summarized for us earlier in the conversation may lead to litigation, brought not by the government, but by private litigants?

Race

[32:45] Yeah.  Well, I mean, Kent, you wrote the book on this, right?  So in terms of litigation risk in California, I think California is a kind of unique beast where it’s got this unfair competition law that effectively creates a private right of action for failing to comply with regulations, and so if you’re either entirely failing to issue these disclosures that are required by the California laws, or you’re sort of complying but, or you issued disclosures, but they’re not meeting all of the standards or they got false statements in there that could create private litigation risk under the California’s unfair competition law, and while the California’s laws mirror other laws and ideas that have been in effect, for example, from the FTC, in terms of greenwashing laws and from the SEC, having these laws on the books creates just another avenue for litigation, another thing to say you’re not complying with and, California’s laws are broader than the SEC’s rule, so even with the SEC’s rule being stayed, even if that ended up getting rescinded or struck down, if California’s laws are still there, that’s still going to impact a lot of entities.

Schmidt

[34:05] Well, I think It’s also a warning for any company whether or not they fall within the disclosure requirements to be aware that any statements to the public, their potential customers about their environmental consciousness, their aspirational goals of eliminating, or reducing their carbon footprint, reducing greenhouse gas, could be material in a person’s decision whether to buy goods or services, or invest, and whether or not they fall within the requirements of these statutes we’ve talked about, a litigant can say you know, I never would have done business with this even financial institution, or other services oriented company because I only do business with those that are responsible members of the of the business community, and this is going to be an increasing area of litigation.  Brian, you’ve already touched on the SEC issue.  It’s not hard to imagine consumer class action litigation from SEC filings that are incomplete, but do you see, after a major flood, or hurricane, or drought, litigation tied to these SEC regulations brought by shareholders that point to an inadequate disclosure?

Bell

[35:31] So, where I see it coming, is where natural resources company, oil and gas companies, they may go after them in particular because they view them as under reporting their GHG emissions, or somehow downplaying the climate risk, and they may do that, both to get them to more accurately disclose the emissions and the risk, but also to just publicize the GHG emissions that are coming from some of these companies.

Schmidt

[36:02] And so we’re, with respect to both of these, the California regulations and the SEC, we’re not necessarily looking at a lawsuit brought focused entirely on the inadequate disclosure, but other claims that are brought, that the inadequate disclosure really provides a boost for, you know, you can point to it as just to illustrate that our other claims are valid, they haven’t even made the sufficient disclosure, and it adds some heft to the contentions and the allegations that are that are being advanced.  I think that’s a pretty typical in environmental litigation, isn’t it?

Bell

[36:37] Yeah, and I think that that’s one of the, I think critiques of the SEC getting involved here anyways, is that there, this is really, the SEC is getting involved in a way that is, you know, I think what the, you know, plaintiffs challenging would say is and, you know, essentially environmental activism and that’s not what the purpose obviously of the SEC is, and that this is going to be used by more activists to actually challenge the disclosures and to really give them [UNINTELLIGIBLE] of action to challenge those disclosures, which really isn’t the purpose of the SEC.  It’s to, obviously to provide information to investors, not to give environmental activists another way to attack these companies.

Schmidt

[37:23] Well that’s a very fair point.  It’ll be interesting to see how all this unfolds over the next several months and even years.  That’s about all the time we have to talk about these environmental regulations, and the litigation risk that are related to them.  At this point in our show, we always like to do what we call the deeper dive, and learn a little bit more about our guests as individuals, when they’re not practicing law or keeping up on current trends in the environmental regulatory front.  So I’d like to ask both of you a question, since we’re on a podcast about non-legal podcasts, I’ll limit it to that, not that I don’t want you to talk about any of my other friends that are out there doing legal podcasts, but maybe we’ll begin with you.  Brian, what type of podcasts do you enjoy, perhaps, to get your mind off of all these regulatory issues outside of work?

Bell

[38:17] One that I’ve been listening to a lot, I think a lot of lawyers are interested in history, but I listen to a lot of history podcasts, and recently I’ve gotten really interested in a podcast called The Rest Is History, which is a pair of British historians who do all different kinds of topics, from the Aztecs to, Liv was listening to one today on September 11th, which was the first history podcast that I’ve ever listened to that covered something that I remember very, very well.  So I really like that one.  So a lot of history podcasts, but then other than that, I love This American Life, Radiolab, kind of the typical but The Rest Is History, I really enjoy and that’s been a new one for me.

Schmidt

[39:02] That’s great.  I, speaking of history, I just finished the Netflix show last night on the Cold War and the nuclear arms race, and it was fascinating as well.  They taking us all the way back from the first part of the 20th century up until what’s going on in Ukraine, and I think it was nine episodes, but it was terrific as well, so I enjoy history.  How about you, Kayla?  Non-legal podcasts, I assume you have a few of those that you like to listen to.

Race

[39:32] Yeah, I like to listen to the New York Times as the daily, to kind of get my dose of non‑legal news since most of the news that I read is specifically environmental law news, so can get the happening haps of the world outside of the environmental law realm.  But yeah I mean, sometimes I like to just tune out and listen to some of the more mindless podcasts while I’m working out too.  No, not quite as smart as things as Brian and you were talking about, but my mindless podcast is right now is SmartLess.  Jason Bateman and Sean Hayes and Will Arnett, so I get, like I get the New York Times to balance that out with my, with my SmartLess podcast.

Schmidt

[40:17] That sounds like an interesting and necessary diversion from all this work in energy and regulatory policy.  Well, thank you both for being here, I’ve enjoyed this conversation, certainly is a topic that is going to be evolving with the litigation and the SEC rules.  If you could just summarize for us, what’s the one take away you would like listeners to have on this issue of these environmental regulations and where we’re going in the near future?

Race

[40:49] Yeah, these laws require a significant effort to comply with from a whole team of people from within your company and from outside of your company.  And these deadlines for compliance is really right around the corner, given the size of effort that is needed to comply, and so, don’t wait and start thinking about this until later, the time is now.

Schmidt

[41:12] It’s a good thing we have some time because it’s quite an undertaking.  Brian, you want to take a stab at that?

Bell

[41:19] These regulations are going to impact companies regardless of what the outcome of the litigation is.  There is already a movement within public companies to disclose these things.  Obviously, those disclosures have to be honest, and so there’s just going to be increasing pressure to make these disclosures.

Schmidt

[41:38] With that, I’d like to thank you both for being here today, and also to thank our listeners for tuning in.  As always, I’m very indebted to the extraordinary team at Dorsey for making this podcast and this episode possible.  For more resources on this and other litigation risks, go to litigationrisk.com, where more information can be found, including a book on managing litigation risk, written by yours truly.  Until next time, my friends, this is yet another reminder that there are a lot of sharks swimming out there in the murky waters, so swim safely.

Voiceover

[42:08] This podcast is not legal advice and does not establish an attorney-client relationship, or create any duty of Dorsey & Whitney LLP for those appearing in this podcast to anyone.  Although we try to assure that the content of this podcast is accurate, comprehensive, and reflects current legal developments, we do not warrant or guarantee those things.  The opinions expressed in this podcast are the opinions of those appearing in the podcast only, and not those of Dorsey & Whitney.  This podcast is considered attorney advertising under the applicable rules of certain states.