Appeal Filed on Conflict Minerals Decision

News Brief

By Cydney Posner

The Chamber of Commerce, National Association of Manufacturers and the Business Roundtable have filed their appeal to the district court decision upholding the conflicts minerals rules.  The appeal identifies six issues for appeal:

1. Whether the SEC erroneously concluded it lacked authority to adopt a de minimis exception, and whether its refusal to adopt such an exception is arbitrary and capricious.

2. Whether the SEC's interpretation of "did originate" in the statute to mean "may have originated" is erroneous or arbitrary and capricious.

3. Whether the SEC's interpretation of the statute as including non-manufacturers who contract for the manufacture of products is erroneous or arbitrary and capricious.

4. Whether providing a shorter transition period for larger companies is arbitrary and capricious, when larger companies will have to depend on smaller companies to comply with the rule.

5. Whether the SEC violated its duty to conduct an adequate analysis of the impact of its rule.

6. Whether the statutory provision and the rule compel speech in violation of the First Amendment.

The brief characterizes as arbitrary decisions by the SEC to reject alternatives that would have greatly reduced the rule's astronomical costs. For example, the brief argues that the SEC first concluded that the statute precluded adoption of a de minimis exception for trace amounts of minerals –the SEC's hands were tied. But as reported by Reuters (see my email of 7/2/13), when the SEC's attorneys made that claim in the oral argument, the judge "challenged this view, at one point telling the SEC attorney that the agency ‘seems to have not really performed the legal analysis correctly' and that the agency has an ‘inherent authority in every case' to issue an exemption." Recognizing its error, the brief states, the SEC then contended at oral argument that, despite what the release states, the agency actually rejected a de minimis exception as a matter of discretion. Even if this "revisionist history" were accepted, the brief argues, the rule would still fail as arbitrary and capricious because the refusal to create a de minimis exception greatly increases costs without any benefits.

Oral argument has not yet been scheduled.

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