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NATURAL RESOURCES DEFENSE COUNCIL v. SEC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


May 19, 1977

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al., Plaintiffs,
v.
SECURITIES AND EXCHANGE COMMISSION, et al., Defendants

The opinion of the court was delivered by: RICHEY

CHARLES R. RICHEY, District Judge

 I. INTRODUCTION

 On December 9, 1974, this Court held that the Securities and Exchange Commission (SEC) had failed to comply with the procedural requirements of section 4 of the Administrative Procedure Act, 5 U.S.C. § 553 (1970), in adopting rules intended to comply with the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. §§ 4321 et seq. (1970), and in denying the portions of plaintiffs' rulemaking petition that sought disclosure of equal employment opportunity information. *fn1" Accordingly, the Court remanded the case to the Commission with directions (1) "to undertake further rulemaking action to bring the Commission's corporate disclosure regulations into full compliance with the letter and spirit of NEPA," *fn2" and (2) to reconsider fully the denial of the equal employment portion of plaintiffs' rulemaking petition. *fn3"

 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. *fn4" 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 *fn5"

 Pursuant to the Court's remand order, the SEC, on February 11, 1975, announced a proceeding to consider further rulemaking. *fn6" 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." *fn7" 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." *fn8" 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. *fn9"

 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. *fn10"

 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. *fn11"

  IV. THE ENVIRONMENTAL ASPECTS OF THE COMMISSION'S RULEMAKING PROCEEDING

 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, *fn12" 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. *fn13"

 Finally, the existing rules required the disclosure of all additional "material" information necessary to make the registrant's statements in required filings neither false nor misleading. *fn14" Despite its consideration of various additional disclosure requirements for environmental information, the Commission decided not to adopt any new disclosure requirements. *fn15" It stated its belief that the existing disclosure requirements "will elicit the type of environmental information in which investors appear to be interested and are more than sufficient to discharge the Commission's NEPA obligations." *fn16"

 Plaintiffs challenge the Commission's decision not to compel additional corporate disclosures of environmental information on two grounds. *fn17" 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": *fn18" 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. *fn19" 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. *fn20" 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

 

neither accidental nor hyperbolic. Rather, [it] is a deliberate command that the duty NEPA imposes upon the agencies to consider environmental factors not be shunted aside in the bureaucratic shuffle.

 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." *fn21"

 

[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 in a "substantial inquiry" into the facts, one that is "searching and careful." . . .

 

A court does not depart from its proper function when it undertakes a study of the record, hopefully perceptive, even as to the evidence on technical and specialized matters, for this enables the court to penetrate to the underlying decisions of the agency, to satisfy itself that the agency has exercised a reasoned discretion, with reasons that do not deviate from or ignore the ascertainable legislative intent.

 

Greater Boston Television Corp. v. FCC, 143 U.S. App. D.C. 383, 392, 444 F.2d 841, 850 (D.C. Cir. 1970), cert. denied, 403 U.S. 923, 91 S. Ct. 2229, 2233, 29 L. Ed. 2d 701 (1971).

 

There is no inconsistency between the deferential standard of review and the requirement that the reviewing court involve itself in even the most complex evidentiary matters; rather the two indicia of arbitrary and capricious review stand in careful balance. The close scrutiny of the evidence is intended to educate the court. It must understand enough about the problem confronting the agency to comprehend the meaning of the evidence relied upon and the evidence discarded; the questions addressed by the agency and those bypassed; the choices open to the agency and those made. . . . The immersion in the evidence is designed solely to enable the court to determine whether the agency decision was rational and based on a consideration of the relevant factors . . . .

 Ethyl Corp., 541 F.2d at 34-36 (Citations & footnotes omitted).

 (2) The Commission's Findings and Conclusions.

 Judicial review of the SEC's decision here challenged by plaintiffs must begin with Securities Release No. 5627, issued by the Commission on October 14, 1975. 40 Fed. Reg. 51,656. This Release, which followed extensive public input (described in section II, supra) and staff analysis, announced the Commission's conclusions and proposals for further rulemaking with regard to the additional disclosure requirements sought by plaintiffs herein.

 As a threshold matter, the Commission concluded that it has broad discretion under the securities laws to determine what matters are appropriate for disclosure, but that its discretion is limited "by the requirement that the Commission determine [that the] disclosure of such matters is either necessary to discharge the Commission's obligations under the Acts or is necessary or appropriate in the public interest or for the protection of investors." *fn22" The Commission then emphasized that it interpreted the securities laws and their legislative history to mean that Congress intended the Commission to exercise its disclosure authority primarily "to require the dissemination of information which is or may be economically significant." *fn23" Thus, it concluded, its broad rulemaking authority is

 

limited to contexts related to the objectives of the federal securities laws. Specifically, insofar as is relevant here, the Commission may require disclosure by registrants under the Securities Act and the Securities Exchange Act if it believes that the information would be necessary or appropriate for the protection of investors or the furtherance of fair, orderly and informed securities markets or for fair opportunity for corporate suffrage. Although disclosure requirements may have some indirect effect on corporate conduct, the Commission may not require disclosure solely for this purpose. *fn24"

 The Commission noted that in exercising its disclosure authority in "contexts related to the objectives of the securities laws" it has to balance investor interest in extensive disclosure on various matters against (1) the danger of "excessive and possibly confusing detail" that might result in disclosures so voluminous that they would be less useful to investors generally, and (2) the cost of such disclosures to registrants, and ultimately to their shareholders. *fn25" It further noted that it

 

has generally resolved these various competing considerations by requiring disclosure only of such information as the Commission believes is important to the reasonable investor -- "material information." 17 CFR §§ 230.405(1), 230.408, 240.12b-20, and 240.14a-9(a). This limitation is believed necessary in order to ensure meaningful and useful disclosure documents of benefit to investors generally without unreasonable costs to registrants and their shareholders. *fn26"

  With regard to the impact of NEPA on its rulemaking authority, the Commission concluded that NEPA did not authorize it to require disclosure by registrants of the environmental effects of their activities solely to promote environmental protection: in other words, that NEPA did not "give explicit content" to the phrase "public interest" which is included in certain of the primary statutory provisions *fn27" that give the Commission its disclosure authority. *fn28" Rather, it concluded that "NEPA authorizes and requires the Commission to consider the promotion of environmental protection 'along with other considerations' in determining whether to require affirmative disclosures by registrants" under the securities laws. *fn29"

 After reaching the above-described conclusions about its statutory authority, the Commission examined five environmental disclosure alternatives that were proposed in its public proceeding. They were: (1) comprehensive disclosure of the environmental effects of corporate activities; (2) disclosure of corporate noncompliance with applicable environmental standards; (3) disclosure of all pending environmental litigation; (4) disclosure of general corporate environmental policy; and (5) disclosure of all capital expenditures and expenses for environmental purposes. *fn30" The Commission rejected alternatives (1), (3), (4), and (5), but decided to adopt alternative (2). Accordingly, the Commission

 

proposed for comment amendments to certain registration and reporting forms and rules 14a-3 and 14c-3 under the Securities Exchange Act which would, where applicable, require a registrant to provide as an exhibit to certain documents filed with the Commission a list of the registrant's most recently filed environmental compliance reports which indicate that the registrant has failed to satisfy, at any time within the previous twelve months, environmental standards established pursuant to a federal statute. In addition, the proposed amendments would, except for purposes of Forms 10 and 12 under the Exchange Act, require the registrant to undertake promptly to provide to investors copies of the reports listed, upon written request and the payment of a specified reasonable fee. *fn31"

 The Commission rejected alternative (1), which would have required comprehensive disclosure of the environmental effects of corporate activities, for several reasons. *fn32" First, it concluded that investors were more interested in whether corporations were acting in "an environmentally unacceptable manner" than whether, and to what extent, corporations had gone beyond what is expected of them. *fn33" Moreover, it concluded that there was virtually no direct investor interest in such voluminous disclosures. In other words, almost all investors would not themselves analyze the comprehensive disclosures, but would instead rely on the opinions of independent analysts, and these opinions, in the Commission's view, added little but "diversity of viewpoint" to the extant federal environmental standards. The Commission further determined that it was unable to identify any established, uniform method of describing comprehensively the environmental effects of corporate activities, and it therefore concluded that both the costs to registrants and the administrative burdens of such a comprehensive disclosure requirement would be "excessive." *fn34" Although the Commission noted that it could attempt to develop its own guidelines and standards to eliminate these problems, it determined that the costs of such an undertaking would be "prohibitive" and, because of the responsibilities of the Environmental Protection Agency and the Council on Environmental Quality, would be "duplicative and of questionable propriety." *fn35" Finally, the Commission concluded that the disclosures required by this alternative would be subjective and "would not lend themselves to comparisons of different companies," which the Commission felt was important to investors choosing between competing investment opportunities. *fn36" For all of the above reasons, the Commission concluded that "the additional costs and burdens [of such disclosure] greatly outweigh resulting benefits to investors and the environment." *fn37"

 The Commission also rejected alternatives (3), (4), and (5). Alternative (3) would have required the disclosure of all pending environmental litigation. As indicated above, existing SEC regulations already required registrants to disclose all environmental proceedings initiated by a government authority and all nongovernmental civil actions if the amounts involved, individually or in the aggregate, exclusive of interest and costs, exceed 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. *fn38" The Commission concluded not to expand these extant requirements to include all nongovernmental proceedings because it found "no method by which to screen out nongovernmental actions which are substantially without merit or to ascertain whether any damages sought have been substantially inflated." *fn39" Alternative (4) would have required registrants to disclose their general environmental policy. The Commission rejected such a requirement because it would result in "subjective disclosures largely incapable of verification and highly susceptible to public relations presentations." *fn40" Alternative (5) would have required registrants to disclose all capital expenditures and expenses for environmental purposes. The Commission concluded that such disclosure would not generally serve as a "meaningful index of corporate environmental practices" because they are "a function of a number of factors, including the extent to which the corporation's activities have a significant effect on the environment or have in the past been subjected to environmental controls." *fn41"

 In addition to these findings and conclusions with respect to the five specific environmental disclosure regulations before it, the Commission also made a number of other significant findings, although it is not clear from the administrative record whether and to what extent these findings contributed to the Commission's ultimate conclusions. Specifically, the Commission found that the investor-participants who favored the disclosure of environmental information did so because they felt that such information was "economically significant." *fn42" In addition, the Commission inferred from the testimony of such investor-participants that they would utilize environmental information more in making voting rather than investment decisions. *fn43" Finally, the Commission found that

 

disclosure to investors of information reflecting corporate compliance with existing environmental standards might have some indirect effect on corporate practices to the benefit of the environment. It seems clear that investors do not at present have ready access to objective information concerning the environmental practices of corporations. And although the relevant compliance reports are reasonably accessible to inhabitants of the localities most directly affected by such practices, there is presently no single governmental source to which an investor can look for the environmental reports filed by a company.

 

Given the fact that there is a degree of interest among some investors in information regarding corporate environmental practices, we conclude that the availability of such information may result in some investor or shareholder action. *fn44"

 As indicated above, the only new environmental disclosure requirement actually proposed for comment by the Commission concerned corporate noncompliance with environmental standards established pursuant to federal statutes. After receiving over 200 letters of comment during the comment period on this additional disclosure requirement, the Commission decided not to implement the proposed requirement. *fn45" Its stated reason for this action was that "requiring the listing and availability of environmental compliance reports would not provide additional meaningful information to investors interested in the environmentally significant aspects of the behavior of registrants." *fn46" The Commission's primary concern with its proposal appears to have been that the disclosure of compliance reports fails to distinguish between de minimus and significant violations of federal standards. It was also concerned about the technical nature of the contents of compliance reports and about the incomparability among various types of reports.

 The Commission considered some modifications to its proposal to avoid such problems. However, it concluded that no "definitive and universal standard can be developed to insure that only reports which relate to 'significant' noncompliance with existing environmental standards would be listed by registrants." *fn47" The Commission specifically noted that it had considered the possibility of requiring registrants to provide a brief narrative description of the information contained in the reports of noncompliance. It concluded, however, that

 

allowing each registrant to apply its own notions of significance would compound, rather than lessen, the difficulty in comparing the environmental performance of different companies. In addition, such a narrative would merely produce information largely duplicative of that already disclosed by registrants. *fn48"

 The Commission also considered the possibility of requiring registrants to disclose violations of environmental standards which were not reported to governmental authorities. It concluded, however, that its existing disclosure rules with regard to "material" information were adequate in this regard inasmuch as they already required such disclosure where "the average prudent investor ought reasonably to be informed." *fn49" Moreover, the Commission said, it

 

does not believe that NEPA was intended to compel it to impose environmental compliance monitoring and reporting requirements more extensive than those created and administered by government authorities charged with substantive regulation of environmental practices. *fn50"

 Thus, the Commission concluded that its proposed requirement for disclosure of environmental compliance reports, with or without modifications, "would be of little value at best, and misleading at worst," and that the burdens of such a requirement therefore outweighed its benefits to investors and to the environment. *fn51"

 The Commission also gave consideration to another environmental disclosure alternative. This alternative, proposed by CEQ, would require registrants "to prepare summaries of significant information which they gather in order to obtain federal, state and local permits, licenses, approvals, or variances, to register new products, to report spills and to monitor discharges and emissions, or for other corporate purposes." *fn52" The Commission concluded that such disclosure was "not designed to, and would be unlikely to, produce information of the type which investors appear to be interested in." *fn53" To the extent that the disclosure of such summaries would promote environmental goals, the Commission felt that it was the "responsibility of the government authorities which receive such information in the first place" to make such information available. *fn54" "In any event," concluded the Commission,

 

in the absence of any indication that the substantial costs involved in such summarization would be outweighed by the resulting benefits, a determination which appears to be totally beyond the scope of our expertise, any such undertaking would clearly be inappropriate. *fn55"

 In sum, therefore, as a result of its lengthy proceeding, the Commission determined not to require disclosures of environmental information in addition to those already required under its existing rules.

 (3) Judicial Review of the Commission's Findings and Conclusions.

 The Court has scrutinized the Commission's findings and conclusions "to determine whether the agency decision was rational and based on a consideration of the relevant factors." Ethyl Corp., 541 F.2d at 36, quoted supra.56 In particular, the Court has studied the Commission's "transitions from its facts to its ultimate conclusions." Leventhal, Environmental Decisionmaking and the Role of the Courts, 122 U. Pa. L. Rev. 509, 540-41 (1974). On the basis of this review, the Court finds that the Commission's decisionmaking process as a whole was marred by serious and fundamental defects and that its rejection of certain specific disclosure alternatives was not rationally based, at least insofar as appears from the Commission's statement of reasons in support of its decision, and is not sustainable on the present administrative record. Accordingly, the Court must conclude that the Commission's final decision not to impose any additional environmental disclosure requirements was arbitrary and capricious, and therefore the Court must remand this matter once again to the Commission for further proceedings.

 First, in considering the various environmental disclosure alternatives, the Commission assessed the benefits and costs of each such alternative as though all such disclosures necessarily must be "across-the-board": In other words, a fundamental premise of the Commission's decisionmaking appears to have been that any disclosure requirement must apply equally to all filings with the Commission and/or communications with shareholders and the public. In particular, the Commission failed to consider the possibility of requiring disclosure of environmental information to shareholders (persons presently owning shares of a registrant corporation) solely in connection with proxy solicitations and information statements (provided to shareholders in connection with annual or other meetings) in order to promote "fair opportunity for the operation of corporate suffrage" *fn57" without requiring identical disclosure in registration statements, prospectuses, and the like. The failure to consider such a possibility is particularly significant in view of the Commission's own conclusions that (1) "insofar as the Commission's rulemaking authority under Section 14(a) of the Securities Exchange Act is concerned, the primacy of economic matters, particularly with respect to shareholder proposals, is somewhat less," *fn58" and (2) investors would utilize environmental information more in making voting decisions than in making investment decisions. *fn59" Moreover, the Commission's failure to assess separately the benefits of disclosure solely to shareholders in connection with voting matters was manifestly inappropriate in view of the Commission's insistence that environmental disclosures not be subjective so that investors could make inter-corporate comparisons. In assessing the benefits of alternative (1), *fn60" alternative (2), *fn61" and the CEQ proposal, *fn62" the Commission appears to have concluded that the disclosures that these alternatives would require would be of limited benefit since they would not provide investors with a meaningful basis for choosing among competing investment opportunities. However, inter-corporate comparison would not, it seems, be of primary importance to shareholders concerned with intra-corporate voting matters. Likewise, the Commission's failure to assess separately the costs of requiring such environmental disclosures to be provided to shareholders in connection with voting matters, or of requiring that such disclosures be filed with the Commission so that interested shareholders could obtain information about their corporation's environmental activities, was clearly inappropriate.

 Second, in connection with its rejection of certain disclosure alternatives, the Commission made several findings with regard to the cost and/or feasibility of developing appropriate disclosure guidelines and standards specifically tailored for environmental information and with regard to the costs of compliance with and administration of the various alternatives. Thus, in rejecting alternative (1), the Commission stated that the costs to registrants of complying with and the administrative burden of the comprehensive disclosure requirement would be "excessive," *fn63" and that the costs of the Commission developing its own guidelines and standards would be "prohibitive." *fn64" In rejecting alternative (2), the Commission concluded that no "definitive and universal standard [of 'significant' noncompliance] can be developed." *fn65" Finally, in rejecting the CEQ alternative, the Commission concluded that the costs of summarization would be "substantial." *fn66" None of these conclusions, however, is supported by any underlying findings of fact; all merely stand as bald assertions by the Commission. It does not appear that the Commission ever engaged in serious consideration of the costs and benefits of developing standards and guidelines, nor does it appear that the Commission, in reaching these conclusions, was relying on cost/benefit studies conducted by anyone outside the Commission. There appears to have been little, if any, effort on the part of the Commission to seek outside expert advice with regard to the costs and feasibility of developing guidelines and standards for the disclosure of environmental information, and there appears to have been little, if any, effort on the part of the Commission to work constructively with registrants and with interested individuals and organizations to develop such guidelines and standards. *fn67" In view of the total dearth of support for its conclusions with regard to costs and feasibility, and in view of its failure to make any serious effort to develop standards and guidelines, the Court must conclude that the Commission's ultimate balancing of costs and benefits was not based on a consideration of the relevant factors and is not sustainable on the administrative record. See Natural Resources Defense Council, Inc. v. United States Nuclear Regulatory Commission, 547 F.2d at 646, 651.

 Third, the Commission, in reaching its conclusions, did not comply with NEPA's procedural mandate, which, as described in subsection B, supra, requires the Commission "to the fullest extent possible under its statutory obligation [to] consider alternatives to its actions which would reduce environmental damage." *fn68" In particular, the Commission's failure to make a serious effort to develop appropriate guidelines and standards for the disclosure of environmental information contravenes the mandate of section 102(2)(B) of NEPA, which directs the Commission to the fullest extent possible to

 

[identify] and develop methods and procedures, in consultation with the Council on Environmental Quality, . . . which will ensure that presently unquantified environmental amenities and values may be given appropriate consideration in decisionmaking along with economic and technical considerations.

 Moreover, the Commission contravened the general procedural mandate of section 102(1) of NEPA *fn69" by rejecting the CEQ alternative on the grounds that (1) "it was the responsibility of the government authorities which receive such information in the first place" to make such information available, *fn70" and (2) the determination of the benefits of such disclosure was totally beyond the Commission's expertise. *fn71" Similarly, it violated section 102(1) to the extent that it based its rejection of alternative (1) on its conclusion that comprehensive disclosure would be of "questionable propriety" because of the responsibilities of the EPA and the CEQ. *fn72" Section 102(1) requires the Commission, and all federal agencies, to administer the policies, regulations, and laws of the United States to the fullest extent possible in accordance with the policies of NEPA. As the Supreme Court said in Flint Ridge, "the phrase [to the fullest extent possible] is a deliberate command that the duty NEPA imposes upon the agencies to consider environmental factors not be shunted aside in the bureaucratic shuffle." 426 U.S. at 787, quoted supra. Yet, the Commission, by basing its decision not to require additional disclosures of environmental information at least in part on its belief that other federal agencies have the necessary expertise and should take the initiative to require disclosure if any is appropriate, clearly shunted aside environmental factors in the bureaucratic shuffle. At the very least, NEPA requires the Commission either to develop such expertise as is necessary to consider fully the benefits and costs of environmental disclosure or to involve in its decisionmaking process such other agencies as have the requisite expertise. It is patently insufficient for the Commission to assert its lack of expertise as one reason for not developing fully a factual record that would permit a reasoned assessment of the costs and benefits of environmental disclosure. Similarly, the Commission's "deference" to other agencies, such as the CEQ and EPA, which the Commission believed should assume the responsibility for establishing disclosure requirements, also contravenes section 102(1). Just as an agency cannot omit the consideration in an impact statement prepared pursuant to section 102(2)(C) of alternatives not within its authority, see Natural Resources Defense Council, Inc. v. Morton, 148 U.S. App. D.C. 5, 458 F.2d 827, 835-38 (D.C. Cir. 1972), so too it cannot refuse to give serious consideration to environmental factors merely because it thinks that another agency should assume the responsibility for promoting the policies of NEPA. See S. Rep. No. 91-296, 91st Cong., 1st Sess. 18-19 (1969).

 In addition to these general "flaws" in the Commission's decisionmaking process, the insufficiency of the Commission's explanation of some of its reasons for rejecting several of the specific disclosure alternatives suggests that the Commission's assessment of these alternatives might not have been entirely rational. Thus, the Commission's conclusion with respect to alternatives (1) and (2) that the proposed disclosure would be "duplicative" *fn73" is left unexplained. In the absence of such an explanation, the Court is unable to determine with sufficient certainty whether this conclusion is fundamentally inconsistent with the Commission's finding that "investors do not at present have ready access to objective information concerning the environmental practices of corporations." *fn74" Similarly, in the absence of more complete explanation, the Court is unable to assess whether the relative absence of "direct" investor interest in environmental information is in fact a relevant consideration and how it compares, for example, with investor interest in various financial disclosures. *fn75" Finally, in connection with the Commission's rejection of alternative (5), the Court is unable to comprehend without a more complete explanation why the fact that the capital expenditure disclosures proposed thereby would be "a function of a number of factors, including the extent to which the corporation's activities have a significant effect on the environment or have in the past been subjected to environmental controls" *fn76" deprives such disclosures of meaningfulness.

 For all of these reasons, *fn77" the Court must conclude that the Commission's decision not to impose additional environmental disclosure requirements on registrants was arbitrary and capricious. Certainly, the Commission's decision was not the product of the "imaginative exercise" of its rulemaking authority envisioned by NEPA and this Court's earlier opinion. 389 F. Supp. at 702. Accordingly, the Court must remand this case to the Commission for further proceedings consistent with this opinion to determine whether additional environmental disclosure requirements would be appropriate to protect investors, to encourage corporate suffrage, and to bring the Commission into full compliance with the letter and spirit of NEPA. See National Resources Defense Council, Inc. v. United States Nuclear Regulatory Commission, 547 F.2d at 654, 655 n.64.

 V. THE EQUAL EMPLOYMENT AND "OTHER MATTERS OF SOCIAL CONCERN" ASPECTS OF THE COMMISSION'S RULEMAKING PROCEEDING

 Pursuant to this Court's Order of December 9, 1974, the Commission's rulemaking proceeding also reconsidered portions of plaintiffs' Natural Resources Defense Council and Project on Corporate Responsibility 1971 petition that sought disclosure of equal employment opportunity information of registrants. Specifically, the petition proposed that the Commission require: "(1) that certain registrants disclose 'a breakdown, in conformity with Consolidated Employer Information Reports EEO-1, showing the figures and percentages of minority or female employment in each of [nine specified job categories]'; and (2) that all registrants disclose information

 

'concerning any proceedings in any court or before any agency challenging compliance by [any] registrant or any subsidiary with the federal Equal Employment Opportunity Act [ 42 U.S.C. §§ 2000e et seq. ] or raising questions as to registrant's compliance with Executive Order 11246 relating to discriminatory hiring practices by employers contracting with the federal government.'" *fn78"

 In addition, the Commission considered the appropriateness of additional disclosure requirements concerning "other matters of social concern."

 A. The Commission's Blanket Rejection Of Any Additional Disclosure Requirements For Equal Employment Opportunity And Other Matters Of "Social Concern" Was Arbitrary And Capricious.

 The Commission decided not to impose any additional disclosure requirements for any "nonenvironmental" matters of social concern because "over 100 different 'social matters' were submitted in which 'ethical investors' were said to be interested." *fn79" The Commission determined that "there is no distinguishing feature which would justify the singling out of equal employment from among the myriad of other social matters in which investors may be interested in the absence of a specific mandate comparable to that of NEPA;" *fn80" and, the Commission concluded,

 

Disclosure of comparable non-material information regarding each of these would in the aggregate make disclosure documents wholly unmanageable and would significantly increase the costs to all involved without, in our view, corresponding benefits to investors generally. *fn81"

 The Commission also indicated particular reasons why it would not implement the equal employment opportunity disclosure requirements proposed by plaintiffs' petition. It concluded that a requirement that all equal employment opportunity proceedings, regardless of scope, would not "screen out actions which are without merit or . . . [in which the] damages sought have been substantially inflated." *fn82" The Commission concluded that its extant "materiality" standard *fn83" would adequately protect investors with regard to civil litigation alleging violations of equal employment opportunity laws and regulations by registrants. With regard to the petition's proposal that registrants be required to file with the Commission EEO-1 Reports containing statistical data about their work force composition, the Commission admitted that such information might be significant in some cases, but concluded that disclosure of such statistical information was not warranted because "meaningful interpretation is dependent upon sophisticated analysis and other information such as the makeup of the available labor pools and existing hiring and promotion practices." *fn84"

 These reasons articulated by the Commission in support of its decision not to require any disclosure of "nonmaterial" equal employment opportunity information, despite its economic significance, *fn85" demonstrate that the Commission's decision was arbitrary and capricious. First, the Commission's conclusion that equal employment opportunity information could not be distinguished from "over 100" other matters of social concern demonstrates that the Commission made no attempt to analyze either the economic significance of equal employment opportunity matters or the costs and/or feasibility of devising appropriate disclosure guidelines. Even a cursory examination of the "over 100" matters deemed equivalent to equal employment opportunity reveals that most, perhaps even all, of these other matters of social concern are substantially less likely than equal employment opportunity to result in significant future financial liabilities to registrants. Moreover, information concerning few, if any, of these other matters is as easily and inexpensively collected and disclosed by registrants as equal employment opportunity information. *fn86" It is sufficient merely to recite the "other matters of social concern" equated to equal employment opportunity to demonstrate this fact:

 

advertising practices; all advertising costs; "false" advertising; contract disputes; patent disputes; compliance with antitrust laws; limitations on competition; concentration in an industry; consumer protection activities and consumer affairs posture; any activities likely to lead to litigation; all litigation (issues, disposition); all litigation but for that settled or dismissed without "conformance of corporate activities to the substance of the complaint; degree of compliance with applicable regulations; all government hearings; all agency actions; a textual summary of agency actions; charitable contributions; company activities undertaken without a goal of profit maximization; community activities; commitment to the "human community "; corporate external relations; "good things a company has done;" financial practices; energy conservation; distribution of resources; investment practices; marketing practices; pricing practices; expenditures in the land grant college system ; receipt of federal subsidies; corporate practices that are damaging to "interests of other investors," the "overall economy," or to "property;" biographical information, including race and sex, regarding directors; interlocking directorates; the existence of a corporate environmental department; control within a corporation; the role of the board of directors; all subsidiaries; all benefits received by directors; "commerciogenic" malnutrition; food production; in-house nutritional research ; registrant's impact on the world food crisis; contractual commitments to purchase crops; a division-by-division breakdown of the number of employees in agri-business companies; foreign investments; nature of operations in South Africa; U.S.-Soviet trade; marketing efforts of drug companies outside the U.S.; employment practices in foreign facilities; registrant's participation in the "flight of companies making hazardous goods to foreign countries;" registrant's participation in the Arab boycott; exports; products made in foreign countries; foreign military goods contracts; foreign beneficial ownership; purchases from, and sales to, communist countries; activities which would be illegal in the U.S. but which are conducted abroad; registrant's impact on unemployment; compliance with the Fair Labor Standards, the Occupational Safety and Health, and the National Labor Relations Acts; health hazards in plants; health standards; effects on the unionized work force of company policies and technology; employee relations other than wages, hours, and working conditions; the psychological work environment ; pension and health protection; management opportunities for women and minorities; the costs of giving "preferential treatment" to blacks and females; safety records; employee training and education; employee benefits, relations and satisfactions; discrimination against persons less than six feet tall ; lobbying efforts; political influence; political contributions; all products by brand name; all product lines; product-by-product financial statements; product purity (recalls, reasons for corrective action); toxic substances produced; product reliability; customer complaints; tobacco products manufactured; alcoholic beverages produced ; gambling equipment manufactured; strip mining; defense contracts and military goods produced; nuclear energy production; banking operations; with respect to agricultural machinery companies, manpower displacement research; tax loophole savings; tax law compliance; all state and federal tax returns; all tax disputes; beneficial ownership; racial justice; prospective legislation; and the willingness to disclose corporate information to shareholders. *fn87"

 While the Commission may be justified in ultimately concluding that a disclosure requirement for equal employment opportunity information may be no more appropriate than a similar requirement for some other matters, it is patently insufficient for the Commission to lump all the above matters together without giving meaningful analysis to the economic significance of each category of information and the costs and/or feasibility of requiring the disclosure of information that is economically significant. *fn88"

  Second, just as with its rejection of environmental disclosure requirements, *fn89" the Commission's failure to analyze the benefits and costs of equal employment opportunity disclosure in connection with proxy solicitations and information statements alone in order to promote "fair opportunity for the operation of corporate suffrage" renders the decisionmaking process arbitrary and capricious.

 Finally, the Commission's conclusion that the disclosure of EEO-1 statistical data would require sophisticated analysis in order for meaningful conclusions to be derived about the registrant's susceptibility to future equal employment opportunity litigation appears to be analogous to its conclusion that there would be little "direct" investor interest in the disclosure of certain environmental information. *fn90" As the Court concluded with regard to the Commission's suggestion that the dearth of "direct" interest vitiates the meaningfulness of such environmental information, the Court is unable, on the basis of the record before it, to assess whether this "need for sophisticated analysis" is a relevant consideration and how it compares, for example, with the need for sophisticated analysis of various financial disclosures.

 For these reasons, the Court concludes that the Commission's rejection of plaintiff's proposal to require the disclosure of equal employment opportunity information was not rationally based and is not sustainable on the present administrative record, and therefore this decision was also arbitrary and capricious. Accordingly, the Court must also remand this case to the Commission for further proceedings consistent with this opinion to consider whether equal employment opportunity disclosure requirements are appropriate.

 VI. CONCLUSION

 For the reasons indicated in sections IV(C) and V of this opinion, the Court concludes that the Commission's decision not to require registrants to disclose additional environmental information and equal employment opportunity information was arbitrary and capricious. Although this proceeding has already consumed a substantial, and perhaps even an unprecedented, amount of the Commission's time, and a substantial amount of the Court's time, and despite the fact that this proceeding has been ongoing for over six years, the Court has no choice but to perform its duty of judicial review and to remand this case to the Commission. This is especially necessary because of the importance to investors and shareholders of such information as it reflects on the economic viability of investments in registrant corporations. Accordingly, the Court will require the Commission to engage in reasoned decisionmaking on the basis of an adequately developed administrative record which has not been done to date. Therefore, 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 additional environmental and equal employment opportunity information was arbitrary and capricious. The Court will require the Commission to undertake further rulemaking in accordance with this opinion with regard to the appropriateness of such disclosure requirements, and will order the Commission to complete such further proceedings within six months of the date of this opinion.

 An Order in accordance with the foregoing will be issued of even date herewith.

 Charles R. Richey / United States District Judge

 [EDITOR'S NOTE: The following court-provided text does not appear at this cite in 432 F. Supp.]

 ORDER

 Upon consideration of the cross motions for summary judgment, the respective points and authorities in support thereof and in opposition thereto, the arguments of counsel in open court, and the entire record herein, and in accordance with the Memorandum Opinion of the Court issued of even date herewith, it is, by the Court, this 19th day of May, 1977,

 ORDERED, ADJUDGED, AND DECREED, that the decision of the defendant Securities and Exchange Commission not to impose upon registrant corporations any environmental or equal employment opportunity disclosure requirements in addition to those presently extant is, on the basis of the present record and the Memorandum Opinion of the Court of even date herewith, declared to be arbitrary and capricious and in violation of 5 U.S.C. § 706(2)(A); and it is

 FURTHER ORDERED, ADJUDGED, AND DECREED, that plaintiffs' motion for summary judgment be, and the same hereby is, granted insofar as it seeks the declaratory relief ordered in the preceding ordered paragraph; and it is

 FURTHER ORDERED, that defendant's motion for summary judgment be, and the same hereby is, denied; and it is

 FURTHER ORDERED, that this case is hereby remanded to the defendant Securities and Exchange Commission for reconsideration, in accordance with the Memorandum Opinion issued of even date herewith, of its decision not to impose additional environmental and equal employment opportunity disclosure requirements upon corporate registrants; and it is

 FURTHER ORDERED, that the defendant Securities and Exchange Commission shall complete the aforesaid reconsideration by no later than six (6) months from the date of this Order; and it is

 FURTHER ORDERED, that this case be, and the same hereby is, dismissed, without prejudice, to the right of plaintiffs to seek further judicial review after the Securities and Exchange Commission completes the reconsideration on remand herein ordered should such further judicial review be just and proper.

 Charles R. Richey United States District Judge.

  MEMORANDUM OPINION OF


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