December 27, 2013 – January 3, 2014
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Sanders (US) LLP and should not be deemed to be endorsements of them. The Recap is intended to be a compilation of articles and events to encourage discussion within the conflict minerals community and to keep our readers updated on the most recent developments.

Will New SEC Disclosure Mandates Be Proposed to Address Developments in Delaware Law?

J. Robert Brown Jr. of TheRacetotheBottom.Org, a professional-faculty-student collaborative blog, recently wrote a blog post titled Delaware’s Top Five Worst Shareholder Decisions for 2013: Louisiana Municipal Police v. The Hershey Company(#5).

In his blog post, Mr. Brown highlights the conflict minerals rule and the resource extraction rule and notes that these type of disclosure rules implemented by the SEC “will only grow.” His reasoning is because under Delaware’s shareholder right to inspect law, Mr. Brown explains, “shareholders must have a ‘proper purpose’ for doing so [inspecting].  Delaware courts have developed an excessively narrow interpretation of the phrase, limiting it, for the most part, to allegations of misconduct by management. Shareholders must do more than allege a proper purpose.  They also, at the pleading stage, must allege a ‘credible basis’ for any proper purpose.  In assessing whether plaintiffs have met this burden, courts generally refuse to allow the standard to be met through inferences drawn from information in the public domain. The effect is to impose an all but impossible burden on shareholders.”

Mr. Brown uses the 2013 Delaware case, Louisiana Municipal Police Employees Retirement System v. The Hershey Company, as a prime example of Delaware’s narrow interpretation of “proper purpose”.  In this case, as Mr. Brown notes, “Plaintiffs sought books and records designed to examine the role, if any, played by Hershey in the use of child labor in connection with the production of cocao [sic].” The court held that the shareholders failed to present any affirmative evidence of child labor misconduct at Hershey and the court would not permit the shareholders to make an inference that child labor was being used at Hershey merely because child labor is used in certain countries that produce a large amount of cocoa beans.

Despite Chair White’s recent reservations concerning the use of the SEC’s mandatory disclosure power to accomplish certain societal goals, might we see a child labor disclosure rule from the SEC in the near future to address Delaware’s right to inspect (or lack thereof)?

December 31, 2013 Marks the End of the Initial Calendar Year for Conflict Minerals Reporting

As you are likely already aware, the conflict minerals rule requires a reporting company to provide its annual conflict minerals information on Form SD (“specialized disclosure”), which is to be provided on a calendar year basis and will be due by May 31st of the following year.

The first reporting period for all reporting companies was January 1, 2013 to December 31, 2013, and the first Form SD must be filed on or before May 31, 2014. The reporting company must make its Form SD available on its website for one (1) year.

Oral Arguments for Conflict Minerals Rule Legal Challenge Scheduled for January 7, 2014

On January 7, 2014, at 9:30 A.M., counsel for the National Association of Manufacturers, et al. and the Securities and Exchange Commission, et al., each had fifteen (15) minutes to argue  their respective briefs in front of the United States Court of Appeals for the District of Columbia Circuit.