District Court Compels the SEC to Promulgate Final Extraction Payments Disclosure Rule
In Oxfam America, Inc. v. SEC, No. 14-13648-DJC, 2015 BL 284860 (D. Mass. Sept. 2, 2015), Oxfam America, Inc. (“Oxfam”) brought an action to compel the SEC to promulgate a final extraction payments disclosure rule under Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The United States District Court for the District of Massachusetts granted Oxfam’s motion for summary judgment and denied the SEC’s cross motion for summary judgment. The court held the SEC “unlawfully withheld” action and the appropriate remedy was to compel the agency to comply with its duty to promulgate the disclosure rule.
Section 1504 of Dodd-Frank amended the Securities Exchange Act of 1934, to require publicly traded oil, gas, and mining companies to disclose payments for the commercial development of oil, natural gas, or minerals made to foreign governments or to the federal government. Section 1504 mandated that the SEC promulgate a rule regarding the disclosure requirements by April 17, 2011.
The SEC proposed a rule on December 23, 2010. http://www.sec.gov/rules/proposed/2011/34-63795.pdf. The proposal received over 150,000 comments. http://www.sec.gov/comments/s7-42-10/s74210.shtml. Following delay in issuing the final disclosure rule, Oxfam filed a complaint alleging the SEC unlawfully withheld and unreasonably delayed promulgating the rule. Within two months of Oxfam filing suit, the SEC issued Rule 13q-1 implementing the final disclosure rule. http://www.sec.gov/rules/final/2012/34-67717.pdf. Consequently, the action was dismissed.
In a subsequent action, however, the United States District Court for the District of Columbia held the SEC misread the requirements under Dodd-Frank, vacated the rule, and remanded to the SEC for further proceedings. Am. Petroleum Inst. v. SEC, 953 F. Supp. 2d 5, 25 (D.D.C. 2013)). After remand, the SEC failed to announce a timeline for the promulgation of the new disclosure rule. Oxfam then instituted the action to compel the SEC to issue the final disclosure rule, and both parties moved for summary judgment.
First, the court held the SEC “unlawfully withheld” action by delaying promulgation of the final disclosure rule. An entity governed by the Administrative Procedure Act (“APA”) “unlawfully withholds” action by failing to comply with a statutorily imposed deadline. The duty to act is unfulfilled where agency action is vacated because the vacatur only restores the status quo. Because the SEC was more than four years past Congress’ deadline for promulgating the disclosure rule, and the vacatur did not reset the deadline, the court concluded the SEC “unlawfully withheld” action.
Next, in determining the proper remedy under the APA, the court looked to the test set out in Telecomms. Research & Action Ctr. v. FCC (TRAC), 750 F.2d 70 (D.C. Cir. 1984). The court in TRAC looked to six factors in assessing agency delay. These included consideration of:
the time agencies take to make decisions must be governed by a “rule of reason”; (2) where Congress has provided a timetable or other indication of the speed with which it expects the agency to proceed in the enabling statute, that statutory scheme may supply content for this rule of reason; (3) delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake; (4) . . . the effect of expediting delayed action on agency activities of a higher or competing priority; (5) . . . the nature and extent of the interests prejudiced by delay; and (6) the [absence of any need to] find any impropriety lurking behind agency lassitude . . .
The court adopted the Tenth Circuit’s analysis, which found Congress’ use of the word “shall” evinced its intent to remove judicial discretion and thus, required the court to compel agency action.
Accordingly, the court granted Oxfam’s motion and ordered the SEC to file an expedited schedule for the promulgation of the final disclosure rule with the court in thirty days.
Primary materials for this case may be found on the DU Corporate Governance website.