On October 2, 2015, the SEC filed a petition for rehearing en banc of the August 18, 2015 panel opinion of the US Court of Appeals for the District of Columbia Circuit in National Association of Manufacturers v. U.S. Securities and Exchange Commission. (discussed here and here). In that opinion, the Court reaffirmed its April 14, 2014 ruling that the conflict minerals rule violates the First Amendment in its requirement that companies disclose that their products have "not been found to be 'DRC conflict free'."
The SEC petition seeks rehearing only as to the First Amendment portion of the earlier opinion—not surprising since the rest of that opinion favored the SEC. The agency argues that en banc review is appropriate because the August 2015 opinion conflicts with earlier precedent regarding compelled corporate speech. In particular the SEC argues that
- En banc review is warranted because the opinion conflicts with this Court’s en banc decision in American Meat Institute v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (“AMI”), as well as Supreme Court precedent, and it addresses issues of exceptional importance.
- In AMI, the Court applied the less stringent First Amendment standard described in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985), to uphold a requirement for companies to disclose “country-of-origin information about meat products.” Yet, despite the fact that it is “hard to see what is altogether different about another species of ‘geographical origin’ law requiring identification of products whose minerals come from the DRC, the panel majority refused to apply Zauderer in this case.
- En banc review is also warranted because the majority’s holding that Zauderer applies only to compelled disclosures in advertisements and product labels addresses a question of exceptional importance. As Judge Srinivasan stated in his dissent, this “newly minted constriction of Zauderer . . . contradicts that decision’s core rationale.” No other court has limited Zauderer in this manner, and at least one other court of appeals has applied Zauderer to compelled disclosures outside of the advertising or labeling context. See United States v. Wenger, 427 F.3d 840 (10th Cir. 2005). Moreover, this holding could have far-reaching implications for governmental disclosure requirements, including those in the securities laws.
It is certainly true that the August opinion has wide-reaching implications—in fact I have wondered why it received relatively little attention when first issued. The conflict minerals rule implications are significant in and of themselves but the potential impact on a disclosure regulation regime is enormous. An en banc decision clarifying the reach of Zauderer is of critical importance.