The SEC, Amnesty International, Global Witness, Free Speech for People, and the National Association of Manufacturers have all filed their briefs, and we are now waiting for the decision on the rehearing — do portions of the SEC’s conflict minerals rule violate the First Amendment?  What follows is an introduction to what is being considered. 

As you may recall, on April 14, 2014, a panel for the Court of Appeals for the District of Columbia Circuit in NAM v. SEC upheld most of the SEC’s conflict minerals rule.  But, it found that requiring issuers to describe products as “not found to be ‘DRC conflict-free’” was compelled speech that violated the issuers’ First Amendment rights.

In limited situations, government regulations require companies to make statement about their products or services.  For example, these requirements may require companies to tell the contents of their product or the cost of the product.   Of course, there are many government regulations requiring public companies to make statements about their operations and financial results.  When a government regulation that compels speech is challenged on First Amendment grounds, the court must determine what level of scrutiny to use in considering whether the regulation violates the First Amendment. In NAM v. SEC, the court considered a couple of levels of scrutiny:  a limited scrutiny under the Zauderer case (which makes it easier for a governmental requirement to survive a challenge) and intermediate scrutiny under the Central Hudson case (which is a more rigorous review and makes it harder for a government requirement to survive a challenge).

Without going through all the constitutional history and arguments, the Court of Appeals held  that the Zauderer test was not the appropriate level of scrutiny to use here.  It went on to conclude that the product descriptions required by the conflict minerals rule did not survive the intermediate scrutiny under Central Hudson.

But, on July 29, 2014, in another case (American Meat), the same Court of Appeals (en banc), expanded the situations in which the more limited scrutiny of Zauderer applies.  It held that Zauderer applies to a government requirement for commercial disclosure of “purely factual and uncontroversial information” about a product or service and not only when the disclosure is intended to prevent deception.

Because the en banc Court of Appeals in American Meat expanded the applicability of Zauderer, the SEC asked the Court of Appeals for a rehearing of NAM v. SEC in light of that more recent en banc decision.  

On November 18, 2014, a panel rehearing was granted, and the court required the parties to file briefs on the following questions:

  1.  What effect does the decision in American Meat have on the conflict minerals rule’s First Amendment issue?
  2. What does “purely factual and uncontroversial information” mean?
  3. Is the decision about what is “uncontroversial information” a question of fact or a question of law?

We’ll provide summaries of the parties’ arguments next week.