SEC Wins Victory in Conflict Minerals Rules Litigation

25 July 2013 Publication
Author(s): Mark T. Plichta Jessica S. Lochmann Patrick G. Quick

Legal News Alert: Transactional & Securities

The SEC’s conflict minerals rules have withstood judicial challenge — so far. On July 23, 2013, the U.S. District Court for the District of Columbia rejected the summary judgment motion of the plaintiffs challenging the conflict minerals rules and upheld the cross-motion by the SEC and an intervenor for summary judgment. The plaintiffs have not announced whether they plan to appeal. While the decision does not necessarily settle the issue, it appears increasingly likely that there will not be judicial relief between now and the end of 2013 or even the deadline for filing the first Form SD, which is May 31, 2014 with respect to calendar year 2013. Accordingly, we recommend that companies continue the process of gathering the information necessary to comply with these new disclosure requirements.

The SEC issued its final rules implementing the related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in August 2012. In October 2012, the National Association of Manufacturers and the Chamber of Commerce of the United States of America (subsequently joined by Business Roundtable) petitioned the U.S. Court of Appeals for the District of Columbia to modify or set aside the SEC’s conflict mineral rules in whole or in part. In April 2013, the case was transferred to the U.S. District Court for the District of Columbia.

The plaintiffs challenged aspects of the rules as arbitrary and capricious under the Administrative Procedures Act and challenged both the rules and the Dodd-Frank Act on First Amendment constitutional grounds. The court rejected these arguments. In discussing the plaintiffs’ Administrative Procedures Act arguments, the court distinguished the conflict minerals rules from the SEC’s proxy access rules that the U.S. Court of Appeals for the District of Columbia vacated in 2011, stating that the proxy access case and similar successful rule challenges “involved rules or regulations that were proposed and adopted by the SEC of its own accord, with the Commission having independently perceived a problem within its purview and having exercised its own judgment to craft a rule or regulation aimed at that problem. ... Here, by contrast, the Commission promulgated the Conflict Minerals Rule pursuant to an express, statutory directive from Congress, which was driven by Congress’s determination that the due diligence and disclosure requirements it enacted would help to promote peace and security in the DRC.”

The SEC’s conflict minerals rules apply to each public company for which conflict minerals are necessary to the functionality or production of one or more of the products that it manufactures or contracts to manufacture and will impact many suppliers, whether or not publicly held. The conflict minerals are columbite-tantalite, cassiterite, gold, wolframite, certain derivatives of those minerals (tantalum, tin and tungsten) and any other mineral or its derivatives determined by the U.S. Secretary of State to be financing conflict in the Democratic Republic of the Congo or any adjoining country. Each public company to which the requirement applies must file a new form — Form SD — on May 31 of each year, regardless of the company’s fiscal year, disclosing, among other things, whether it used conflict minerals in the prior calendar year. A company has until May 31, 2014 to file its first Form SD, and that form must cover the 2013 calendar year. It may or may not be necessary for a company to file a Conflict Minerals Report as an exhibit to its Form SD. Please see our Legal News Alert titled, “SEC Issues Final Rules Regarding Conflict Minerals” at for further information about the SEC’s conflict minerals rules.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this Alert or would like to discuss the topic further, please contact your Foley attorney or the following:

Jessica S. Lochmann
Milwaukee, Wisconsin

Mark T. Plichta
Milwaukee, Wisconsin

Patrick G. Quick
Milwaukee, Wisconsin

James M. Reeves
Milwaukee, Wisconsin

Related Services