In October 2012, a group of business organizations filed suit in the U.S. Court of Appeals for the District of Columbia challenging the conflict minerals rule and Section 1502 of the Dodd-Frank Act. The petitioners requested that the conflict minerals rule be modified or set aside in whole or in part. The litigation challenges the conflict minerals rule on several grounds, including the following:
- The SEC failed to properly evaluate the economic effects of the rule;
- The SEC’s failure to adopt a de minimus exception to the conflict minerals rule was erroneous, arbitrary and capricious or an abuse of discretion;
- The SEC’s interpretation of Section 1502 as including non-manufacturers who “contract to manufacture” products was erroneous, arbitrary and capricious or an abuse of discretion;
- The SEC’s interpretation of Section 1502 as covering companies that have “reason to believe” their conflict minerals “may have originated” in the covered countries was erroneous, arbitrary and capricious or an abuse of discretion; and
- Section 1502 compels speech in violation of the First Amendment to the United States Constitution.
On April 30, 2013, the petitioners requested that the Court of Appeals transfer the conflict minerals litigation to the U.S. District Court for the District of Columbia. On May 2, 2013, the U.S. Court of Appeals granted petitioners’ motion to transfer. This motion to transfer followed the transfer by the U.S. Court of Appeals of a similar case (related to a challenge to the resource extraction rule) in which the U.S. Court of Appeals determined that it lacked jurisdiction to hear such case. The petitioners requested the transfer in hopes that such a transfer would help to avoid delay in resolving the case.
Nevertheless, this transfer may cause a delay in a final decision in the case. The parties are scheduled to appear on July 1, 2013 for a hearing on motions for summary judgment. Public companies should continue in their efforts to comply with the conflict mineral rules.