Glass, Lewis & Co. (Glass Lewis) filed a complaint in the U.S. District Court for the Western District of Texas on July 24, 2025, seeking to end SB 2337, which was recently signed into law in June and will become effective September 1, 2025. 

As a reminder, SB 2337 requires proxy advisers, like Glass Lewis and Institutional Shareholder Services (ISS), to provide detailed disclosures when their voting recommendations respecting Texas corporations are based on non-financial factors, such as environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) considerations. 

It appears that ISS has joined the fight. Like Glass Lewis, ISS filed a complaint on July 24 in the United District Court for the Western District of Texas Austin Division for declaratory and injunctive relief. 

Similar to the arguments made by Glass Lewis, ISS in its complaint argues that SB 2337 regulates speech and violates the First Amendment’s prohibition on content and viewpoint discrimination. Furthermore, according to the complaint, the law impermissibly compels speech by requiring proxy advisers “to say that commonsense investment strategies and objectives are ‘nonfinancial factors’ that ‘subordinate[] the financial interests of shareholders’ – even where the proxy adviser strongly believes that statement to be false.” 

Like Glass Lewis, ISS warns that the disclosures required by SB 2337 could lead to client losses and damage their reputation, particularly if they are required to disclaim their advice as potentially contrary to shareholder interests. 

The complaint points out that while the stated purpose of SB 2337 is to prevent fraud on Texas shareholders, the law is not focused on Texas shareholders. Instead, it applies when proxy advice concerns a Texas corporation, regardless of where the shareholders are located. Glass Lewis made a similar argument in its complaint, noting that “the law does not turn on the location of the proxy adviser or the client.” In any event, ISS argues that shareholders do not need SB 2337 to protect their interests, and that ISS’ clients, in particular, are “sophisticated institutional investors that are eminently capable of making their own decisions.” 

Instead, ISS suggests that SB 2337 was designed “to benefit and protect corporate boards and management, to the detriment of shareholders, whose votes serve as an important check and balance on the boards that serve those shareholders.” 

Like Glass Lewis, ISS argues that the consideration of ESG factors “are a well-established and routine part of investors’ risk and return analyses,” and that “Texas is singling out particular speech by particular speakers because it does not like that speech or the speaker.”

The complaint also alleges that the law is unconstitutionally vague, violates the Contracts Clause of the U.S. Constitution, in that it will substantially impair ISS’ contractual relationships with customers without any legitimate public purpose, and that the law is both expressly and impliedly preempted by the federal Investment Advisers Act of 1940, as amended, and SEC regulations promulgated thereunder, in that it impermissibly imposes state regulation on the advisory services of federally registered investment advisers like ISS.