D.C. Circuit Shows Interest in Rehearing Panel’s SEC Conflict Minerals Rule Decision

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By Yin Wilczek

Aug. 29 — The U.S. Court of Appeals for the District of Columbia has indicated its interest in rehearing a recent decision that parts of the Securities and Exchange Commission's conflict minerals rule violated the First Amendment.

In late May, the SEC and intervenor Amnesty International separately petitioned the full court to rehear the case in light of a then-pending ruling in an unrelated action—American Meat Institute. v. USDA—that they argued could have significant bearing on its conflict minerals decision.

In an Aug. 28 order, the D.C. Circuit directed the National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable—the three business groups that challenged the SEC rule—to file a joint response to the petitions for rehearing en banc within 15 days of its order.

Serious Consideration

Julie Murray, a Public Citizen Litigation Group attorney who represents Amnesty in the case, Aug. 29 told Bloomberg BNA that the court order indicates that the D.C. Circuit is “seriously considering” the SEC and Amnesty's petitions.

“The conflict minerals rule is a commonsense disclosure requirement that provides investors and consumers with key factual information,” Murray said. “Companies do not have a First Amendment right to keep the public in the dark with respect to this kind of factual information about their products.”

The SEC and representatives from the three business groups did not immediately respond to requests for comment.

However, the groups previously said in a joint statement that they do not believe the American Meat Institute ruling should change the outcome of the conflict minerals decision.

The SEC rule—1934 Securities Exchange Act Rule 13p-1—requires companies and foreign private issuers in the U.S. to disclose their use of so-called “conflict minerals”—gold, tantalum, tin and tungsten from the Democratic Republic of Congo and adjacent countries—if those minerals are “necessary” to a product made by the companies.

Split Panel

In an April 14 decision, a split D.C. Circuit panel found that the rule ran afoul of the First Amendment to the extent it requires issuers to report to the commission and to state on their website that any of their products have not been found to be “DRC conflict free”.

At the time, Judge Sri Srinivasan wrote separately that the majority should have withheld its decision on the constitutional issue pending a ruling by the full D.C. Circuit in American Meat Institute, which involved First Amendment claims filed in connection with a Department of Agriculture rule requiring country-of-origin labeling.

The SEC has since implemented other parts of the rule not implicated by the court's decision.

‘American Meat Institute' Decision

On July 29, the D.C. Circuit ruled in American Meat Institute that it may apply “rational basis review”—a lower standard of scrutiny—to compelled disclosures even in cases not involving consumer deception.

In the wake of the decision, Amnesty in mid-August urged the D.C. Circuit to rehear its conflict minerals ruling. The group said in a supplemental brief that the American Meat Institute decision “expressly overruled a portion of the panel's First Amendment opinion in this case.”

“As we argued in the supplemental brief, in light of AMI, the panel's decision here requires revision, either by the panel itself or the full D.C. Circuit,” Murray told Bloomberg BNA.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Phyllis Diamond at mailto:%20pdiamond@bna.com

The conflict minerals decision is available at http://www.bloomberglaw.com/public/document/NATIONAL_ASSOCIATION_OF_MANUFACTURERS_ET_AL_APPELLANTS_v_SECURITI.

The court's Aug. 28 order is available at http://www.bloomberglaw.com/public/document/Natl_Assoc_of_Manufacturers_et_al_v_SEC_et_al_Docket_No_1305252_D/17.