FIGHT THE POWER: En Banc Fifth Circuit Will Hear NCLA Lawsuit Against Legally Defective Nasdaq Board Diversity Rules.

The U.S. Court of Appeals for the Fifth Circuit has agreed to an en banc rehearing of the New Civil Liberties Alliance’s National Center for Public Policy Research v. SEC lawsuit challenging “Board Diversity Rules” that SEC promulgated without statutory authority. These rules impose race, gender, and sexual orientation quotas on corporate board membership for companies listed on the Nasdaq stock exchange, along with compelling corporate speech to explain any quota missed. SEC also furnishes lists of quota-satisfying names to companies unable to meet such quotas on their own. NCLA welcomes the opportunity to argue this case before the full Fifth Circuit, where we will urge the Court to set these unlawful rules aside. The Court also granted the petition for rehearing en banc filed in the case by the Alliance for Fair Board Recruitment.

Nasdaq reported a wave of alleged investor interest in discriminating against some companies and in favor of others based on the gender, race, and sexual orientation of those companies’ directors. Nasdaq responded by proposing a set of rules to SEC that would help investors discriminate with respect to these identities. One Rule forces every Nasdaq-listed company to either include on its board minimum quotas of individuals of a certain gender, race, and sexual orientation, or else to explain why the board does not meet such quotas. The Rules also require the companies to publicly disclose information about their directors’ self-identified gender, race, and sexuality. These measures compel speech in derogation of the First Amendment, and they further violate Americans’ rights to due process of law and equal protection under the law.

Reminder/Disclosure: I’m on the NCLA Advisory Board.