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Industry Groups’ Emergency Motion for Full Stay of Conflict Minerals Disclosure Rule Denied by DC Circuit

May 15, 2014 | Energy, Natural Resources & Utilities

 

This is a further update to our coverage of the final rules adopted by the Securities and Exchange Commission (the “Commission”) for the implementation of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires issuers who file annual reports with the Commission to provide annual disclosure regarding their use of “conflict minerals” (the “Final Rule”). For a complete discussion of the conflict minerals disclosure requirements, please see our prior client alerts (see OMM August 22, 2012, Client Alert: SEC Adopts Conflict Minerals Disclosure Requirements; see also OMM June 3, 2013, Client Alert: SEC Staff Publishes FAQs on Conflict Minerals Disclosure).

On April 14, 2014, the U.S. Court of Appeals for the D.C. Circuit (the “DC Court”) issued an opinion[1] that unanimously upheld the Final Rule under the Administrative Procedure Act, but invalidated the requirement that an issuer provide disclosure, using the phrase “not been found to be DRC conflict free,” if its products contain metals mined in the Congo or other conflict jurisdictions (see OMM April 24, 2014, Client Alert: DC Circuit Decision Holds Aspect of Conflict Minerals Disclosure Rule Violates First Amendment, Creating Uncertainty on Rule Implementation).

On April 29, 2014, the Commission’s Division of Corporation Finance issued a statement on the DC Court’s decision, implementing a partial stay in regards to those portions of the Final Rule deemed to violate the First Amendment by the DC Court’s ruling, but leaving in place the June 2, 2014 Form SD filing deadline for issuers (see OMM May 1, 2014, Client Alert: Securities and Exchange Commission Issues Statement on DC Court of Appeals Decision on Conflict Minerals Rule).

On May 5, 2014, the National Association of Manufacturers, Chamber of Commerce of the United States of America, and Business Roundtable (“Petitioners”) filed an Emergency Motion requesting that the DC Court stay the Final Rule, including the June 2, 2014 Form SD filing deadline. Petitioners argue that “without the compelled confession, the current rule makes little sense as presently designed,” and does not fulfill the objectives of Dodd-Frank Section 1502. Petitioners claim that the Final Rule “no longer ‘create[s] incentives’ by shaming companies and it no longer ‘enhances transparency’ by purportedly informing the public whether an issuer sourced minerals from armed groups in the DRC.” Petitioners claim they will suffer irreparable harm if compelled to comply with the Final Rule prior to a decision by the district court on remand, due to the “extraordinary and unrecoverable expenditures as well as unresolvable legal uncertainty about the rule’s requirements.” Petitioners requested the DC Court make the decision by May 26, 2014.

On May 14, 2014, the DC Court denied the Petitioners’ motion in a one sentence per curiam order, without providing any reasoning behind the decision. Therefore, the June 2, 2014 deadline for issuers to file a Form SD remains in effect. Some companies proceeded with a disclosure under the Final Rule, prior to the DC Court’s ruling (see May 12, 2014 Form SD filing by Affymetrix, Inc.).


1 National Association of Manufacturers et al. v. Securities Exchange Commission, No. 13-5252, available at http://www.cadc.uscourts.gov/internet/opinions.nsf/D3B5DAF947A03F2785257CBA0053AEF8/$file/13-5252-1488184.pdf

 


 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Robert Plesnarski, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, Eric Rothenberg, an O'Melveny partner licensed to practice law in Missouri and New York, John Renneisen, an O'Melveny counsel licensed to practice law in the District of Columbia, and Jesse Glickstein, an O'Melveny associate licensed to practice law in New Jersey and New York, contributed to the content of this newsletter The views expressed in this newsletter are the views of the authors except as otherwise noted.

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