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Conflict Minerals Challenge: DC Circuit Grants Panel Rehearing
Practical Law Legal Update 2-588-9148 (Approx. 4 pages)
Conflict Minerals Challenge: DC Circuit Grants Panel Rehearing
by Practical Law Corporate & Securities
| Published on 18 Nov 2014 • USA (National/Federal) |
The US Court of Appeals for the DC Circuit granted a petition by the SEC and Amnesty International for a panel rehearing of the court's decision in April 2014 striking down a portion of the conflict minerals rule.
On November 18, 2014, the US Court of Appeals for the District of Columbia Circuit issued an order granting petitions by the SEC and Amnesty International for a panel rehearing of portions of the court's April 2014 ruling in National Association of Manufacturers, et al v. U.S. Securities and Exchange Commission holding that certain requirements of the rule as adopted by the SEC violate the First Amendment to the US Constitution.
On April 14, 2014, the Court of Appeals ruled on a legal challenge brought by the business groups against the conflict minerals rule. The ruling held that the rule violates the First Amendment to the US Constitution to the extent it requires companies to disclose that their products have "not been found to be 'DRC conflict free.'" As adopted by the SEC, the rule required this disclosure under certain circumstances. The Court of Appeals rejected several other arguments challenging the rule as arbitrary and capricious under the Administrative Procedure Act and Exchange Act. For more information on the holding, see Legal Update, Conflict Minerals Challenge: DC Circuit Strikes Disclosure Provision and Upholds Rest of Rule. The April 2014 ruling did not stay the conflict minerals rule, and reporting companies filed their first Form SD conflict minerals disclosures by June 2, 2014.
The National Association of Manufacturers and other business groups had argued against a rehearing of the portions of the decision striking down parts of the conflict minerals rule. Among other things, the business group appellants distinguished the statements required by the conflict minerals rule from other instances of compelled speech by claiming that the conflict minerals rule requires companies to make statements that are not purely factual and uncontroversial, but instead are laden with value judgements.
The Court of Appeals' order requests the parties in the case file supplemental briefs addressing the following issues:
- The effect, if any, of the Court of Appeals' ruling in American Meat Institute v. U.S. Department of Agriculture (760 F.3d 18 (D.C. Cir. 2014) (en banc)) on the First Amendment issue in the conflict minerals case regarding the rule's requirement that companies disclose that their products are not DRC conflict free. In American Meat Institute, the Court of Appeals upheld country-of-origin labelling on meat products, finding that disclosure mandated by Congress regarding the location of an animal's birth, raising and slaughter does not violate the First Amendment.
- The meaning of "purely factual and uncontroversial information" as used in Zauderer v. Office of Disciplinary Counsel (471 U.S. 626 (1985)) and American Meat Institute.
- Whether the determination of what is "uncontroversial information" is a question of fact.
In a separate order issued on the same day, the Court of Appeals deferred consideration of the petitions for rehearing en banc pending disposition of the petitions for panel rehearing, and granted Amnesty International's motion for leave to file a supplemental brief in support of the petitions for rehearing en banc.
For more information on the conflict minerals rule, see Practice Note, Conflict Minerals Diligence.