In the final week of 2014, appellants National Association of Manufacturers, U.S. Chamber of Commerce and Business Roundtable filed their supplemental brief in the conflict minerals case, National Association of Manufacturers, Inc. v. SEC. The brief was filed in response to the order of the D.C. Circuit Court of Appeals, which had granted the petitions of the SEC and Amnesty International for panel rehearing in connection with the case.  The order of the Circuit Court directed the parties to file supplemental briefs addressing the following specific questions related to the case’s 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?

The SEC, intervenor Amnesty International and amici Global Witness and Free Speech for People filed their briefs in early December.

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 7/16/147/29/14 and 9/14/14.)  With AMI decided, the question then was whether, under Zauderer and AMI, the mandated conflict minerals disclosure could satisfy the test for “purely factual and uncontroversial” commercial information, the focus of the Court’s questions above.

According to appellants, the principles underlying Zauderer – that Zauderer’s more lenient standard “does not apply unless the government-mandated statements are ‘of “purely factual and uncontroversial information” about the good or service being offered’”– were still intact, notwithstanding the Court’s having overruled the deception limitation. Appellants asked the Court to “amend its opinion in this case to clarify that the Securities and Exchange Commission’s (SEC’s) Conflict Minerals Rule is not a ‘purely factual and uncontroversial’ disclosure requirement within the meaning of Zauderer.”

Appellants argued there are three components to the Zauderer “purely factual and uncontroversial” requirement. “First, the compelled statement must be purely factual in nature: it cannot explicitly or implicitly convey an opinion, a political or ideological position, or a moral judgment.” Here, they contended, the compelled statement was not factual in nature: as the initial panel had stated, “the label ‘conflict free’” is not a statement of literal fact, because ‘[p]roducts and minerals do not fight conflicts.’” In addition, that the statute provides a definition of a “loaded ideological phrase does not render that phrase ‘purely factual,’” and companies may well have a completely different understanding of the term. Rather, the compelled statement is an ideological judgment that companies that “cannot confirm where the minerals in their products originated bear some ‘moral responsibility for the Congo war.’” Accordingly, the compelled statement conveys an “ideological and moral judgment,” not purely factual information. Appellants distinguished Meese v. Keene, on which appellees relied, on the basis that the argument there concerned the government’s characterization of the product, not the actual compelled statement, which was viewed as innocuous and not challenged. In this case, there is no challenge to the government’s right to characterize the products.

The second component, appellants argued, is that the “compelled statement must be ‘indisputably accurate and not subject to misinterpretation.’” In this case, however, they contended that the compelled statement “is both non-factual and controversial because it is highly misleading, susceptible to interpretations that are not factually accurate”: many companies required to make the compelled statement will have a tenuous or no connection to the region. Rather, the compelled statement obscures the “deep uncertainty” regarding the location of origin of the minerals. As a result, companies’ “compelled association with the armed conflict [is] misleading and inaccurate.” As indicated in AMI, a “statement that is untrue or misleading does not convey ‘facts,’ and a statement is not ‘uncontroversial’ if the speaker can reasonably ‘disagree with the truth of the facts required to be disclosed’ or if the ‘required factual disclosures’ are ‘one-sided or incomplete.’” The right of companies to provide further explanatory context is, as the panel had indicated, “’inadequate to cure a First Amendment violation.’”

Third, even if a compelled statement were literally accurate, it may still be “controversial” if it “’communicates a message that is controversial.’” Under the First Amendment, they contended, the government cannot compel companies to convey a “governmental position on a controversial topic” or “force companies to speak on contentious public issues, particularly where the ‘compelled recitation of a message’ risks interfering with the company’s own message or skewing the public debate.” Appellants asserted that the term “conflict free” is a loaded one, and its required use appears to “endorse the government’s view that the mineral trade is responsible for the conflict. This is a highly controversial position, with which many policy experts disagree.”  The First Amendment, they argue, prohibits the government from creating “a false appearance of consensus, and thereby skew public debate and opinion, by compelling the establishment of private echo chambers for the government’s views.” In response to the Court’s question, they argued that the question of whether a compelled statement is “uncontroversial” is a matter of law for the Court to decide.

Moreover, they asserted, the compelled statement is unconstitutional because it is not even commercial speech; rather, it is political speech that should be subject to strict scrutiny. Finally, even if Zauderer did apply, there is an insufficient relationship between means and ends to satisfy even that test: “the rule’s highly indirect and attenuated means do not reasonably further that end,” and may even be counterproductive. The rule serves only to inform consumers, which is not, they argue, the purpose of the statute. In this case, they contend, the compelled speech “conveys the government’s moral disapproval of a lawful product. This is not a substantial interest, and the compelled statement violates the First Amendment.”

Both sides having now addressed the issues raised above, it is up to the panel to decide.  Stay tuned.