The opinion of the court was delivered by: RICHEY
CHARLES R. RICHEY, District Judge
As described more fully herein, the SEC has now completed the further rulemaking proceedings required by this Court's remand order and, after reconsideration in light of substantial public input, it has determined not to impose disclosure requirements in addition to those presently extant.
Plaintiffs admit that the scope and conduct of the Commission's rulemaking proceeding satisfy the procedural requirements of the APA and that the Commission's statement of reasons for its rulemaking actions is adequate to permit judicial review. They now seek, pursuant to 5 U.S.C. §§ 701-06, judicial review of the Commission's final decision not to require additional disclosures. This case is now, therefore, before the Court on cross motions for summary judgment on the issue of whether the SEC's final determinations were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). See Camp v. Pitts, 411 U.S. 138, 36 L. Ed. 2d 106, 93 S. Ct. 1241 (1973); Ethyl Corp. v. EPA, 176 U.S. App. D.C. 373, 541 F.2d 1 (D.C. Cir.) (en banc), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 394 (1976).
For the reasons hereinafter set forth, the Court rejects plaintiffs' argument that NEPA requires the Commission to impose additional environmental disclosure requirements on registrants and that the Commission's decision not to impose such additional disclosure requirements was therefore "not in accordance with law." Notwithstanding this conclusion, however, the Court concludes that NEPA requires the Commission to give serious consideration in its decisionmaking to environmental factors, and requires that the Commission neither strike an arbitrary balance of costs and benefits nor give clearly insufficient weight to environmental values in its decisionmaking. Upon review of the Commission's decision not to impose such additional environmental disclosure requirements, the Court concludes that this decision was the product of a decisionmaking process marred by serious and fundamental defects and that the Commission's rejection of certain specific disclosure alternatives was not rationally based and is not sustainable on the present administrative record. Thus, the Court concludes that the Commission's decision not to require additional environmental disclosures was "arbitrary and capricious." Finally, the Court also concludes that the Commission's decision not to impose any disclosure requirement for equal employment opportunity information was not rationally based and is not sustainable on the present administrative record, and therefore the Court concludes that this decision was also "arbitrary and capricious." Accordingly, the Court will grant plaintiffs' motion for summary judgment insofar as it seeks a declaratory judgment that the Commission's decision not to require registrants to disclose equal employment opportunity information and additional environmental information was arbitrary and capricious, and the Court will remand this case to the Commission and require it to reconsider these matters in accordance with this opinion.
II. FACTUAL BACKGROUND
Pursuant to the Court's remand order, the SEC, on February 11, 1975, announced a proceeding to consider further rulemaking.
Public hearings commenced on April 14, 1975, and were held on 19 separate days with the last hearing on May 14, 1975. During this time the Commission received 54 oral representations. In addition, during April and May of 1975, the Commission received 353 written comments. On October 14, 1975, the Commission announced "its conclusion and proposals for further rulemaking . . . concerning possible disclosure in registration statements, reports and other documents filed with the Commission or required to be furnished to investors pursuant to the Securities Act of 1933 and the Securities and Exchange Act of 1934 of environmental and other matters of social concern, including equal employment matters."
It proposed for comment "rules which would make available to interested investors information regarding the extent to which corporations have failed to satisfy environmental standards under federal law."
The Commission determined, however, that it would not be appropriate to propose either alternative environmental disclosure requirements or specific disclosure requirements regarding corporate equal employment and other practices.
The Commission received approximately 210 letters of comment concerning its proposed rules on disclosure of instances of corporate noncompliance with federal environmental laws. On the basis of these comments, and after extended consideration, the Commission announced on May 6, 1976, that it had concluded not to adopt its rulemaking proposal on the disclosure of information regarding the extent of corporate noncompliance with federal environmental standards.
III. STATUTORY BACKGROUND
The provisions of the securities laws that establish the SEC's authority to conduct the instant rulemaking proceedings are as follows: Sections 7 and 10 of the Securities Act, 15 U.S.C. §§ 77g, 77j, prescribe certain types of information that must be disclosed in registration statements and prospectuses, respectively. In addition, they authorize the Commission to require the disclosure of such other information as it "may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors." 15 U.S.C. §§ 77g, 77j(c). Similarly, section 14(a) of the Securities Exchange Act, 15 U.S.C. § 78n(a), authorizes the Commission to require disclosure in connection with proxy solicitations "as necessary or appropriate in the public interest or for the protection of investors." In addition, sections 19(a) of the Securities Act and 23(a) of the Securities Exchange Act, 15 U.S.C. §§ 77s(a), 78w(a), vest in the Commission general authority to promulgate such rules and regulations "as may be necessary" in administering the securities laws.
At the time of the rulemaking proceeding, the SEC's existing disclosure rules required registrants to disclose three "categories" of environmental information. First, the general requirement of disclosure of "material" information, information "which an average prudent investor ought reasonably to be informed" about,
required the disclosure of the "material" effects that compliance with federal, state, and local environmental laws may have on capital expenditures, earnings, and competitive position.
Second, a specific rule required the disclosure of all litigation, commenced or known to be contemplated, against a registrant by a governmental authority pursuant to federal, state, or local environmental laws.
Plaintiffs challenge the Commission's decision not to compel additional corporate disclosures of environmental information on two grounds.
First, they assert that "NEPA imposes on the Commission a mandatory obligation to develop a substantial program of corporate disclosure that will advance the act's objectives":
Plaintiffs take the position that NEPA requires the SEC to compel substantial corporate disclosures which will (1) deter corporate activities that adversely affect the environment, and (2) provide investors with necessary information to make "environmentally responsible" investment and voting decisions.
Second, plaintiffs argue that even if NEPA does not mandate substantial additional disclosures, the Commission's decision not to exercise its authority to compel such disclosures "in the public interest or for the protection of investors" was arbitrary and capricious.
A. NEPA Does Not Mandate That The Commission Require Additional Corporate Disclosure Of Environmental Information.
It is necessary for the Court to consider first plaintiffs' argument that NEPA mandates that the Commission promulgate broad environmental disclosure regulations, for if plaintiffs' reading of NEPA is correct, the existing environmental disclosure regulations are certainly "not in accordance with law." 5 U.S.C. § 706(2)(A). Plaintiffs base their "mandatory" argument on two grounds. First, they assert that an SEC requirement that corporations disclose substantial information concerning their activities that have an adverse impact on the environment would have a significant deterrent effect on such activities with the result that the quality of the environment would ultimately be improved.
Plaintiffs premise this argument primarily on sections 101(b)(3) and 102(1) of NEPA, 42 U.S.C. §§ 4331(b)(3), 4332(1), which they contend establish a substantive mandate of environmental protection for all federal agencies. Second, plaintiffs assert that corporate disclosure would provide significant environmental information to investors and the public that is not presently available in any meaningful form. Therefore, they argue, section 102(2)(F), 42 U.S.C. § 4332(2)(F), requires the Commission to exercise its authority to generate and make available such information.
The Court has reviewed the language of the three NEPA provisions relied on by plaintiffs, the pertinent legislative history, and the relatively few cases that have discussed the "substantive mandate" of these provisions, and the Court concludes that none of these provisions mandates that the Commission must impose substantial environmental disclosure requirements on registrants as plaintiffs contend. As the Court of Appeals for the District of Columbia Circuit said in the seminal NEPA case of Calvert Cliffs' Coordinating Committee, Inc. v. United States Atomic Energy Commission, (hereinafter, Calvert Cliffs'), 146 U.S. App. D.C. 33, 449 F.2d 1109, 1112 (D.C. Cir. 1971): "Congress did not establish environmental protection as an exclusive goal . . . . [The] general substantive policy of the Act is a flexible one. It leaves room for a responsible exercise of discretion and may not require particular substantive results in particular problematic instances." The Court of Appeals for this Circuit recently reiterated this conclusion: ". . . NEPA does not guarantee a particular outcome on the merits; rather, the statute mandates only a 'careful and informed decisionmaking process' to enlighten the decisionmaker and the public." Natural Resources Defense Council, Inc. v. United States Nuclear Regulatory Commission, 178 U.S. App. D.C. 336, 547 F.2d 633, 654 (D.C. Cir. 1976), cert. granted, 429 U.S. 1090, 97 S. Ct. 1098, 51 L. Ed. 2d 535 (1977), rev'd, 435 U.S. 519, 98 S. Ct. 1197, 55 L. Ed. 2d 460 (1978). Thus, it appears well settled that the decision to take or not to take particular action is "broadly committed" to the agency's discretion. Environmental Defense Fund, Inc. v. Corps of Engineers (Tennessee-Tombigbee), 492 F.2d 1123, 1139 n.33 (5th Cir. 1974).
B. NEPA Does Mandate That The Commission, "To The Fullest Extent Possible," Consider Seriously "Alternatives To Its Actions Which Would Reduce Environmental Damage," And NEPA Further Mandates That The Commission Not Strike An Arbitrary Balance Of Costs And Benefits Nor Give Clearly Insufficient Weight To Environmental Values.
While neither section 101(b)(3), section 102(1), nor section 102(2)(F) of NEPA requires the Commission to impose additional environmental disclosure requirements on registrants, section 102(2)(1) does require the Commission "to give full consideration to environmental protection": It "requires that an agency must -- to the fullest extent possible under its statutory obligations -- consider alternatives to its actions which would reduce environmental damage." Calvert Cliffs', 449 F.2d at 1128. As the Supreme Court recently stated in Flint Ridge Development Co. v. Scenic Rivers Association, 426 U.S. 776, 787, 49 L. Ed. 2d 205, 96 S. Ct. 2430 (1976), the section 102 phrase "to the fullest extent possible" is
Moreover, it is clear that while, as indicated above, an agency's decision to take or not to take particular action is "broadly committed" to the agency's discretion, the agency's decision should not be sustained by a reviewing court if that decision was based on an arbitrary balance of costs and benefits or if the agency "clearly gave insufficient weight to environmental values." Calvert Cliffs ', 449 F.2d at 1115; Sierra Club v. Morton, 169 U.S. App. D.C. 20, 514 F.2d 856, 874 & n.25 (D.C. Cir. 1975), rev'd on other grounds sub nom., Kleppe v. Sierra Club, 427 U.S. 390, 49 L. Ed. 2d 576, 96 S. Ct. 2718 (1976); Environmental Defense Fund, Inc. v. Corps of Engineers (Gillham Dam), 470 F.2d 289, 300 (8th Cir. 1972), cert. denied, 412 U.S. 931, 37 L. Ed. 2d 160, 93 S. Ct. 2749 (1973).
C. The Commission's Decision To Reject Various Environmental Disclosure Alternatives Was Not Based On A Consideration Of Relevant Factors, Was Not Rational, And Was In Violation Of NEPA's Procedural Mandate, And Therefore Its Decision Was "Arbitrary And Capricious."
(1) The "Arbitrary and Capricious" Standard of Review.
With the above-articulated considerations in mind, it is necessary to consider plaintiffs' argument that the Commission's decision not to require corporations to make additional disclosures was arbitrary and capricious. Before engaging in actual review of the Commission's rulemaking proceeding and the basis for its final determination, however, it is important, as the Court of Appeals for this Circuit recently said in its en banc decision in Ethyl Corp. v. EPA, 176 U.S. App. D.C. 373, 541 F.2d 1, 37 (D.C. Cir.), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 394 (1976), to keep the "'arbitrary and capricious' standard firmly in mind."
[The arbitrary and capricious] standard of review is a highly deferential one. It presumes agency action to be valid. Moreover, it forbids the court's substituting its judgment for that of the agency, and requires affirmance if a rational basis exists for the agency's decision.
This is not to say, however, that we must rubber-stamp the agency decision as correct. To do so would render the appellate process a superfluous (although time-consuming) ritual. Rather, the reviewing court must assure itself that the agency decision was "based on a consideration of the relevant factors." Moreover, it must engage ...