Round Two of a fight between the state of Texas and proxy advisory firm Institutional Shareholder Services is now underway before Round One has ended, after a new lawsuit was filed by the state in Collin County this week.
Texas has hired former United States Attorney General William Barr and his law firm, Torridon Law, to bring the state court lawsuit accusing ISS of prioritizing “its own environmental, social, and governance agenda over the fiscal well-being of its clients.” Meanwhile, two federal lawsuits are still pending in Texas, where ISS and Glass, Lewis & Co. are independently bringing constitutional challenges to S.B. 2337.
Under that law, proxy advisers are required to tell clients their recommendations are “not provided solely in the financial interest of the shareholders” if they have made the recommendation “wholly or partly based on … one or more nonfinancial factors, including … an environmental, social or governance goal, factor or investment principle” or “diversity, equity or inclusion.” A preliminary injunction, entered by U.S. District Judge Alan Albright, is currently barring enforcement of that statute.
At least four state attorneys general filed similar lawsuits against ISS yesterday, including Nebraska, West Virginia and Iowa. And similar to the lawsuit filed in Texas by ISS, the firm is also challenging state disclosure statutes in Indiana and Kansas.
Lawyers representing the firms in the Texas federal suits either declined to comment or did not respond to a request for comment Thursday.
Collin County Lawsuit
In a press release announcing the Collin County lawsuit against ISS, Texas Attorney General Ken Paxton called the “highly influential proxy advisor” a “woke corporation” that was attempting to “smuggle radical, liberal ideology into the companies they advise and hurt our financial system.”
“I am suing ISS to restore integrity to America’s proxy voting system and put an end to the financial damage caused by putting liberal ideology above sound investment principles,” he said.
The 25-page lawsuit, seeking more than $1 million in damages, brings claims for violations of the Texas Deceptive Trade Practices Act and opens by alleging ISS is making false representations to Texas investors when it tells those clients it is “independent and objective” and helps consumers make “informed decisions.”
“These false, deceptive and misleading practices of advertising independent and objective advice while secretly prioritizing a private agenda violate the laws of Texas,” the lawsuit states.
The lawsuit points out that ISS, combined with Glass Lewis, make up 90 percent of the proxy advisory market.
“These companies’ recommendations, therefore, carry immense influence and the two companies sit at a center of power in terms of their ability to influence corporate behavior,” the suit reads.
As of press time, it did not appear that Texas had filed a state court lawsuit against Glass Lewis.
The lawsuit in Collin County also seeks a temporary restraining order and a temporary injunction against ISS that would require the firm to “disclose its ESG initiatives to Texas consumers.”
“Under the DTPA, Texas need only prove the following to obtain a temporary restraining order and temporary injunction against ISS: (1) that the attorney general has reason to believe it is engaging in, has engaged in, or is about to engage in any act or practice declared to be unlawful by the DTPA, and (2) that proceedings would be in the public interest,” the lawsuit reads.
As of press time, it was not clear who is defending ISS in the state court action.
The lawsuit has been assigned to Collin County District Judge Robert “Bryan” Gantt, who was initially appointed to the bench in September 2024 by Gov. Greg Abbott to replace Judge Andrea Bouressa, whom he appointed to the Texas Business Court. The governor reappointed Judge Gantt to the bench in December 2024.
In addition to Barr, Texas is also represented by Scott Froman and Lauren McGee of the Texas attorney general’s office and Jason S. Miyares, David M. Levine, Timothy J. Shea and Ryan G. Ferguson of Torridon Law.
The Timeline
June 20, 2025 — Gov. Abbott signs S.B. 2337 into law.
July 24, 2025 — ISS and Glass Lewis file suit challenging the law in federal court in Texas.
Aug. 29, 2025 — U.S. District Judge Albright grants a motion for a preliminary injunction to both ISS and Glass, barring enforcement of S.B. 2337 against the firms.
Sept. 16, 2025 — Paxton launches an investigation into ISS and Glass Lewis “for potentially misleading institutional investors and public companies by issuing voting recommendations that advance radical political agendas rather than sound financial principles.”
Sept. 18, 2025 — Paxton files notice of appeal regarding the preliminary injunction.
Nov. 20, 2025 — Glass Lewis moves for summary judgment.
Nov. 25, 2025 — Paxton moves to voluntarily dismiss his appeal, telling the Fifth Circuit “it is highly unlikely” the case will be “fully briefed, argued and disposed of by this court prior to the issuance of a final judgment resulting from the February 2026 trial.” [The bench trial did not end up taking place.]
Dec. 1, 2025 — The U.S. Court of Appeals for the Fifth Circuit grants the motion to dismiss.
Dec. 9, 2025 — ISS moves for summary judgment.
Dec. 18, 2025 — Judge Albright consolidates the Glass Lewis and ISS cases for pretrial proceedings.
Feb. 2, 2026 — Judge Albright enters an order deferring ruling on the motions for summary judgment.
March 16, 2026 — Paxton asks the court to clarify the scope of the injunction and its effect on the civil investigative demand involving Glass Lewis.
May 15, 2025 — Judge Albright declines to clarify his injunction order, writing in a text order that “the injunction order is clear and thus requires no ‘clarification.’ The injunction order states plainly: ‘Defendant Attorney General Paxton and his agents, employees, and all persons acting under his direction or control from taking any action to enforce S.B. 2337 against Glass, Lewis & Co., LLC, including but not limited to intervention in any private right of action.’ Defendant is not barred from enforcing other provisions of the law against Glass, Lewis, & Co., LLC at this time.”
May 20, 2025 — Paxton sues ISS in Collin County.
The Federal Lawsuits in Texas
Last summer, Glass Lewis and ISS filed suit alleging S.B. 2337 violates the First Amendment and constitutes viewpoint discrimination.
Glass Lewis, in a 45-page suit, called S.B. 2337 a “novel, first-of-its-kind law” that was passed by lawmakers as “part of a wave of political pushback against ESG and DEI initiatives.” ISS said in its 38-page lawsuit that the law “identifies particular investment objections that the state of Texas disagrees with, labels them ‘nonfinancial factors,’ and imposes onerous regulations on proxy advisors who consider — at their clients’ request — these objectives as part of their service of providing proxy advice to those clients.”
The lawsuits also reference comments lawmakers Texas Sen. Bryan Hughes and Texas Rep. Jeff Leach made when the bill was being discussed and debated in the Legislature.
“[T]he point here is to make sure that proxy advisory firms, when they’re rendering advice . . . that they’re focused on economic factors. … So, when they’re focused on non-economic-type factors, whether it’s ESG, whether it’s DEI … that’s what we want to prevent,” the lawsuit states, purportedly quoting Leach.
Hughes allegedly said during a debate on the bill April 24, 2025, that “proxy advisory firms have become increasingly political with a hard left bent.”
About a week before Judge Albright enjoined enforcement of the law, Paxton issued a statement calling S.B. 2337 “critical for promoting transparency in corporate America” and vowing to “continue to defend it aggressively in the courts.”
“The role of a proxy advisor is to provide sound guidance based on financial considerations, not use their position to promote woke, left-wing ideology,” the statement reads. “S.B. 2337 stops liberal activists posing as proxy advisors from giving guidance based on their ideological goals without making that clear to their clients.”
In a motion to dismiss filed Aug. 15, Paxton argued neither firm had suffered any injury as a result of the new “consumer protection law,” depriving the court of jurisdiction over the case. He also argued that the firms “failed to plausibly allege any causes of action against the attorney general.”
“S.B. 2337 is sound,” the motion argues. “It does not violate the U.S. Constitution, and it is not preempted by any federal law.”
The case had originally been scheduled for a bench trial before Judge Albright in February. As of Thursday, a new trial date had not been set.
Judge Albright has announced he will be resigning from the bench at the end of August.
In the federal lawsuit, ISS is represented by Anna G. Bobrow, Dana A. Raphael, David M. Foster, James Mackenzie, James Yates, Jessica Ellsworth, Lacy Brown, Michael West, Sam Zwingli and Bruce Oakley of Hogan Lovells. Glass Lewis is represented by Bryce L. Callahan, Grant Martinez, Jared LeBrun and Lily Hann of Yetter Coleman.
In the federal lawsuits, Paxton is represented by Charles Winkelman of the Texas attorney general’s office.
The intervenor defendants in the federal lawsuit — the Texas Stock Exchange and the Texas Association of Business — are represented by Brinton Lucas, Mark Rasmussen, Noel Francisco, Sidney McClung and Timothy Villari of Jones Day.
The case number for the Collin County lawsuit is 471-03459-2026. The federal lawsuit case numbers are 1:25-cv-01153 and 1:25-cv-01160.