The D.C. Circuit court of Appeals has granted the petitions of the SEC and Amnesty International for panel rehearing (and the motion of Amnesty to file a supplemental brief) in connection with the conflict minerals case, National Association of Manufacturers, Inc. v. SEC. (The Court also ordered that the petitions filed for rehearing en banc be deferred pending disposition of the petitions for panel rehearing.)

The per curiam order of the Circuit Court directs the parties to file supplemental briefs addressing the following specific questions related to the First Amendment issue:

(1) What effect, if any, does this court’s ruling in American Meat Institute v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (en banc), have on the First Amendment issue in this case regarding the conflict mineral disclosure requirement?

(2) What is 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 v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (en banc)?

(3) Is determination of what is “uncontroversial information” a question of fact?

By way of background, in April, a three-judge panel of the D.C. Circuit struck down a portion of the SEC’s conflict minerals rule on First Amendment grounds. In that case, the Court decided that the requirement to disclose whether companies’ products were “not found to be DRC conflict free” amounted to “compelled speech” in violation of companies’ First Amendment rights.  Both the SEC and Amnesty International filed petitions with the D.C. Circuit requesting a rehearing en banc regarding the First Amendment issue, but requested that the Court hold the petitions in abeyance pending issuance of the en banc decision on a similar issue in American Meat Institute v. U.S. Dept. of Agriculture. The precise question that was before the en banc panel in AMI was “[w]hether, under the First Amendment, judicial review of mandatory disclosure of ‘purely factual and uncontroversial’ commercial information, compelled for reasons other than preventing deception, can properly proceed under [the more lenient standard of] Zauderer v. Office of Disciplinary Counsel… or whether such compelled disclosure is subject to review under Central Hudson Gas & Electric v. PSC of New York….”  The en banc panel  in AMI held (with two dissents) that “Zauderer in fact does reach beyond problems of deception, sufficiently to encompass the disclosure mandates at issue here.” Moreover, specifically citing the NAM conflict minerals case, the Court indicated that “[t]o the extent that other cases in this circuit may be read as holding to the contrary and limiting Zauderer to cases in which the government points to an interest in correcting deception, we now overrule them.” (For a more complete discussion of these cases and legal standards, see my posts of, 7/16/14, 7/29/14 and 9/15/14.)

With AMI decided, Amnesty filed its brief in support of its petition for rehearing. Amnesty argued that AMI’s rationale and its express overruling of a portion of the panel opinion in NAM “make clear that the panel erred in failing to apply the standard for First Amendment review set forth in Zauderer.…” and, therefore, ”reconsideration of the panel opinion is necessary, and under Zauderer, the commercial disclosure requirement at issue should be upheld.” Further, Amnesty argued that the “Court need not determine that the conflict-mineral disclosure is purely factual and uncontroversial to uphold the disclosure requirement…..Properly understood, Zauderer’s reference to ‘purely factual and uncontroversial information’ was descriptive with respect to the disclosure at issue and did not purport to set a threshold  requirement for Zauderer’s application in all cases.”  (Query whether the Court’s three questions above suggest that the Court has already assumed that “purely factual and uncontroversial information”  is indeed a threshold matter?) Even if it were as threshold, Amnesty argued, the threshold was met: “the descriptor” was based on “an objective definition” set forth in Dodd-Frank, and the plaintiffs did not contest the underlying facts regarding the conflict in the DRC or that armed groups responsible for perpetuating it received funding from  the sale of minerals covered by the disclosure requirement.

In its response brief, NAM argued that the standard for en banc review was not satisfied because rehearing was not necessary for uniformity of decisions and the case did not involve a question of exceptional importance. Consequently, NAM contended, the panel should instead amend its decision in light of AMI “to clarify that the compelled statement is not eligible for Zauderer review because it does not constitute ‘purely factual and uncontroversial information.’”  NAM contended that AMI “reaffirmed that Zauderer is limited to purely factual and uncontroversial disclosures. The… Conflict Minerals Rule is not a ‘purely factual and uncontroversial’ disclosure requirement. Rather, as the panel majority stated, it forces companies to ‘confess blood on [their] hands.’… Issuers are forced to bear a scarlet letter that is laden with value judgments and opprobrious connotations with which they strongly disagree, because the rule compels them to make a statement that ‘conveys moral responsibility for the Congo war,’ and ‘tell[s] consumers that [the issuers’] products are ethically tainted.’” Further, citing to the recent admission by the US Dept. of Commerce that it was unable to distinguish which facilities processed minerals that were used to finance conflict in the DRC, NAM contended that the compelled statement is not purely factual because, in many cases, issuers “are compelled to admit to potential complicity” because they are simply unable to identify the source of their minerals. In addition, it maintained, the “compelled statement reflects a governmental viewpoint that the mineral trade bears responsibility for causing the DRC conflict. That is not a ‘purely factual and uncontroversial’ matter,…but rather a policy conclusion, with which many experts disagree.” Moreover, NAM argued, the statement is not even factual, but rather “highly misleading, because it obscures the deep uncertainty regarding the origin of the minerals.”  Even though the definitions are contained in the statute, they are still “pregnant with political and ideological conclusions.”  The government, it argued, “cannot force a company to apply a loaded ideological label merely by giving that label an ‘objective’ definition. If the standard were otherwise, companies could be forced, for instance, to state whether their products (or family-planning clinics) have not been found to be ‘socially conscious,’ or to support ‘family values,’ as long as those phrases were defined by a statute in seemingly ‘factual’ terms.”

Hopefully, a decision will be rendered before the next round of conflict minerals filings is due at the SEC on June 1, 2015.  Stay tuned.