National Ass'n of Manufacturers v. Securities & Exchange Commission
409 U.S. App. D.C. 210
| D.C. Cir. | 2014Background
- Congo war and humanitarian catastrophe over past fifteen years, with widespread human rights abuses and civilian casualties.
- Minerals (gold, tantalum, tin, tungsten) fuel armed groups via regional mining networks and trading/processing chains.
- Dodd-Frank Conflict Minerals provision (§1502) requires SEC to issue rules mandating disclosure of conflict-mineral sourcing and due diligence.
- Final SEC rule implements a three-step process: coverage determination, reasonable country of origin inquiry, and due-diligence with private-sector audit for products not DRC conflict-free.
- Rule applies to issuers of securities under 13(a) or 15(d), with phase-in allowing “DRC conflict undeterminable” declarations during the transition; costs estimated billions with uncertain social benefits.
- Litigation: National Association of Manufacturers challenged the rule under the APA, Exchange Act, and First Amendment; district court granted summary judgment for SEC and intervenor Amnesty International.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| De minimis exception not included | NAM argues the rule should have a de minimis carve-out | SEC claimed no de minimis exception needed and that statute and purpose foreclose it | No error; rational basis for no per-issuer de minimis exception |
| Due diligence threshold and scope | NAM alleges the due-diligence requirement exceeds statutory text | SEC validly filled gaps using delegated authority; threshold is reasonable | Rule's due-diligence threshold valid; threshold rational and serves goals |
| Scope to contractors as well as manufacturers | NAM contends statute limits to manufacturers | Statute silent; agency discretion to apply to contractors to prevent circumvention | Reasonable interpretation to cover contractors; not foreclosed by text |
| First Amendment compelled-speech claim (not DRC conflict-free label) | Labeling products as not DRC conflict-free compels speech | Disclosure serves information; Zauderer standard may apply; rational basis insufficient | Label-compulsion violates First Amendment to the extent it requires the specified descriptor; assess under Central Hudson for remaining parts |
Key Cases Cited
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (U.S. 1983) (arbitrary/policy-driven agency action must have rational basis)
- Pub. Citizen, Inc. v. FAA, 988 F.2d 186 (D.C. Cir. 1993) (deference to agency cost/benefit analyses in rulemaking)
- Ala. Power Co. v. Costle, 636 F.2d 323 (D.C. Cir. 1979) (agency interpretations given deference when reasonable)
- PDK Labs., Inc. v. DEA, 362 F.3d 786 (D.C. Cir. 2004) (statutory interpretation and agency discretion in filling gaps)
- Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (U.S. 1984) (deference to agency statutory construction when text is ambiguous)
- FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (U.S. 2000) (limits on agency reach when statute restricts regulatory domain)
- Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (U.S. 1985) (for compelled commercial disclosures, more than merely ideological speech)
- Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (U.S. 1980) (test for constitutional validity of commercial-speech regulation)
- R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205 (D.C. Cir. 2012) (discusses Zauderer applicability to disclosures)
- American Meat Institute v. USDA, 746 F.3d 1065 (D.C. Cir. 2014) (en banc consideration of Zauderer applicability)