Between May 8 and May 13, briefs on the trade associations’ emergency motion for stay were filed by the SEC, the trade association petitioners, an industry coalition, and Amnesty International. Two steps remain — First, the oral argument in American Meat Institute, which is set for May 19. American Meat Institute is a case involving a First Amendment issue related to the one in the conflict minerals case. Second, the decision by the Court of Appeals on the trade associations’ emergency motion for stay, which was requested to be made by May 26 (just one week before the conflict minerals June 2 filing deadline).
SEC Reply Brief
The SEC filed its brief opposing the trade associations’ emergency motion for stay on Friday, May 9. In the “Background” section of the brief, the SEC described the disclosure that it expects issuers to provide as a result of the partial stay it issued on May 2, 2014. As it did in its partial stay, the SEC explained that its stay of the portion of the Rule that would have required companies to categorize products as “not found to be ‘DRC conflict free'” would avoid the risk of First Amendment harm. The SEC went on to argue that the disclosure of a company’s reasonable country of origin inquiry and due diligence efforts would have value as it would “bring greater public awareness of the source of issuers’ conflict minerals and [ ] promote the exercise of due diligence on conflict minerals supply chains.”
Trade Associations’ Reply in Support
The trade associations’ reply in support of their emergency motion was filed today, May 13th. In their brief, the trade associations argued that without the required description of products as “not found to be ‘DRC conflict free,'” “the current Rule utterly fails to link any issuers to armed groups, which was the whole reason for the Rule in the first place” (emphasis in original). As has been noted by many companies now struggling to draft their first reports, the disclosures remaining after implementing the SEC’s partial stay do not show which issuers are sourcing from mines controlled by armed groups and which issuers are sourcing from “other, wholly legitimate mines in the region that are not controlled by armed groups.” The trade associations argued that it is not possible to accomplish the intent of Congress without the “unconstitutional threat of shaming.”
Industry Coalition — On May 8th an industry coalition consisting of American Coatings Association, American Chemistry Council, Can Manufacturers Institute, Consumer Specialty Products Association, Foodservice Packaging Institute, North American Metal Packaging Alliance, Inc., and The Society of the Plastics Industry filed an amicus brief supporting the trade associations’ emergency motion for stay. In its brief, the industry coalition requested that the Rule or at least the June 2, 2014 filing deadline be stayed “until all litigation regarding the Rule has been completed and the SEC clarifies what information must be included in any Form SDs and conflict minerals reports.” The industry coalition argued that alternative disclosure requirements need to be developed and that the SEC Statement from April 29 did not provide clear guidance on what companies must include in their reports in the wake of the Court of Appeals decision.
Amnesty International — Finally, Amnesty International filed a brief in opposition to the motion for stay on May 9th. Amnesty argued that a stay of the Rule would “harm investors and consumers like Amnesty International who have a strong interest in using the information disclosed under the Conflict Minerals Rule.” They did not elaborate on precisely how they would use that information, but other NGOs have indicated that they will review and score companies’ disclosure and report their results in order to pressure companies to alter their sourcing practices.
As we wait for the Court’s decision on the emergency motion for stay and for the argument of American Meat Institute, companies should be aware that if they file their Form SDs and Conflict Minerals Reports before May 26, those filings may include disclosures that will not ultimately be required. Stay tuned for the results of these proceedings.