Earlier today, Glass Lewis announced that it would pursue litigation against the Texas Attorney General to prevent him from enforcing SB 2337. The firm is pushing back after sustained political opposition. I grabbed a copy of the complaint from BloombergLaw if you want to read it.
Glass Lewis argues in its complaint that Texas’s law is unconstitutionally vague, viewpoint discrimination, content-based discrimination, impedes freedom of association, generally violating the First Amendment, preempted by ERISA, and violates the Dormant Commerce Clause.
This is the message from Glass Lewis:
We are writing today to inform you that Glass Lewis has made the difficult decision to initiate legal action against the Attorney General of Texas. In this letter, we explain the reasons why we are pursuing this legal path to protect our business and, by extension, our clients and the proxy voting industry, as a whole.
Over the last several months, Glass Lewis and other proxy advisors have been targeted by a variety of political detractors and corporate executives critical of our business model and the role we play in supporting institutional shareholders in carrying out their proxy voting responsibilities.
In fact, three states attorneys general have opened inquiries into supposed consumer fraud and antitrust issues (one of which immediately sued us, falsely claiming we had not responded to an earlier letter and another state’s inquiry); the U.S. House Judiciary and Financial Services Committees conducted hearings, one interrogating the “proxy cartel”; and a group of Senators wrote us with a series of questions and document requests. All of this and more in the last six months.
Texas Senate Bill 2337
The Texas Legislature took these challenges further by enacting Senate Bill 2337, an unprecedented law deeming much of what proxy advisors consider—including governance matters—not to be in the financial interest of investors. The law will take effect September 1, 2025.
Glass Lewis has stated emphatically and publicly that Texas S.B. 2337 is categorically unworkable. It would require a broad range of proxy advice regarding Texas companies to include misleading “warnings” that we believe will expose us to unwarranted lawsuits and open our clients to fiduciary risk.
The law has two sets of requirements:
- Whenever proxy advice “takes into account” various factors—including even a single corporate governance factor—the proxy advisor must provide a notice to its clients and the covered company that “conspicuously states that the service is not being provided solely in the financial interest of the company’s shareholders because it is based wholly or partly on one or more nonfinancial factors.”
- Whenever a proxy advisor provides different advice to different clients or issues any recommendation on a ballot item that is against management’s recommendation, it must notify its clients, the company that is the subject of the advice, and the Texas Attorney General of that “conflicting” advice. The proxy advisor must also then say which of the conflicting advice was provided solely in the financial interest of shareholders.
Glass Lewis Has Decided to Take Legal Action
Glass Lewis always tries to work constructively with policy makers. We attempted that here, but Texas legislators chose not to engage with us or the broader institutional investor community in developing their new, unprecedented law.
Therefore, on July 24, 2025, Glass Lewis filed a complaint in the U.S. District Court for the Western District of Texas against Ken Paxton, the Texas Attorney General. The complaint seeks an order declaring S.B. 2337 unlawful and an injunction against its enforcement by the Attorney General. At the same time, Glass Lewis filed a motion for preliminary injunction asking the court to enjoin, or stop, enforcement of the law before it becomes effective on September 1, 2025.
We assure you that this decision was not made lightly. However, given the law’s extreme measures and serious flaws, we believe that trying to comply with it would impose significant and pointless costs on us and our clients, force us to provide highly misleading warnings to our clients, as well as subject Glass Lewis and its clients to the risk of unwarranted litigation by private parties and the Texas Attorney General. We therefore felt compelled to take this step to defend our ability to continue to serve our clients in the manner they expect.
For more information on Texas S.B. 2337 and the reasons for our concerns, please see our blog post.
As Glass Lewis always does, we will work to keep our clients as informed as possible throughout the process. In the meantime, thank you for your support,
Sincerely,
Your Glass Lewis Team
This will be an interesting case to watch.