The U.S. Chamber of Commerce and a consortium of business groups have filed a notice of appeal and a motion for expedited appeal with the DC Circuit of a federal district judge ruling that upheld SEC regulations implementing the conflict minerals provisions of the Dodd-Frank Act. The district court was convinced that the Commission discharged any potential responsibility to consider whether the regulations will promote efficiency, competition, and capital formation, and that the Commission appropriately considered the impact on competition more generally. The court emphasized that the regulations were not promulgated by the Commission on its own accord, but rather the conflict minerals regulations were promulgated pursuant to an express, statutory directive from Congress, which was driven by a Congressional determination that the due diligence and disclosure requirements it enacted would help to promote peace and security in the DRC. As a result, said the court, the SEC rightly maintains that its role was not to “second-guess” Congressional judgment as to the benefits of disclosure, but to, instead, promulgate a rule that would promote the benefits Congress identified and that would adhere closely to that congressional command. (National Assoc. of Manufacturers, Chamber of Commerce and Business Roundtable v. SEC, CA-DofC, August 12 and 14, 2013)
The final regulations became effective on November 13, 2012, and the first reports and disclosures it requires are due to be filed with the SEC by May 31, 2014. Ultimately, the Commission declined to adopt any categorical de minimis exception as part of the final rules. In the district court’s view, the SEC’s de minimis determination was rationally based upon the evidence before it. While it may be true that the adoption of some type of de minimis approach could also have been a reasonable, alternative option, noted the court, this does not render the SEC’s contrary determination arbitrary or unreasonable.
In their motion for expedited appeal, the business groups proposed an expedited review schedule, with briefing concluding in November of 2013, that they believe will greatly increase the possibility that the case can be decided before the first disclosures and reports under the Rule would be due in May of 2014.
The appellants are a trade association, a business federation, and an association of chief executive officers, collectively representing thousands of publicly traded companies, many of which are burdened with what they said are the astronomical costs of the conflict minerals rule. They argued that delay will cause irreparable injury because the conflict minerals rule will impose extraordinary costs upon them which cannot be recovered. If their challenge is successful, noted the business groups, expedited consideration would help spare them at least some of the costs of preparing, auditing, and filing the reports, as well as the costs of ongoing compliance in 2014.