National Association of Manufacturers v. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

NATIONAL ASSOCIATION OF
MANUFACTURERS, CHAMBER
OF COMMERCE OF THE UNITED
STATES OF AMERICA, and
BUSINESS ROUNDTABLE, Civil Action No. 13-cv-635 (RLW)

Plaintiffs,

v.

SECURITIES AND EXCHANGE
COMMISSION,

Defendant,

AMNESTY INTERNATIONAL USA,
and AMNESTY INTERNATIONAL LTD.,

Intervenor-Defendants.

MEMORANDUM OPINION

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L.

No. 111-203, 124 Stat. 1376 (2010) (“Dodd-Frank”), the Securities and Exchange Commission

promulgated a rule imposing certain disclosure requirements for companies that use “conflict

minerals” originating in and around the Democratic Republic of the Congo (“DRC”). Conflict

Minerals, 77 Fed. Reg. 56,274 (Sept. 12, 2012) (codified at 17 C.F.R. §§ 240, 249b) (the

“Conflict Minerals Rule,” “Final Rule,” or “Rule”). The plaintiffs in this action—the National

Association of Manufacturers (“NAM”), the Chamber of Commerce, and Business Roundtable

(collectively, “Plaintiffs”)—challenge various aspects of the SEC’s Final Rule as arbitrary and

1
capricious under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701, et seq. 1 Plaintiffs

also mount a constitutional attack against both the Rule and Dodd-Frank § 1502, claiming that

the disclosures required by the SEC and by Congress run afoul of the First Amendment. Finding

no problems with the SEC’s rulemaking and disagreeing that the “conflict minerals” disclosure

scheme transgresses the First Amendment, the Court concludes that Plaintiffs’ claims lack merit.

Accordingly, upon careful consideration of the parties’ briefing and the arguments of counsel,

along with a thorough review of the Joint Appendix the parties relied upon as the administrative

record in this case, the Court, for the reasons that follow, will DENY Plaintiffs’ Motion for

Summary Judgment (Dkt. No. 14) and will GRANT the Commission’s and Intervenors’ Cross-

Motions for Summary Judgment (Dkt. Nos. 15, 16).

BACKGROUND

A. Statutory and Regulatory Framework

1. Dodd-Frank Act § 1502

Responding to the national financial downturn, Congress enacted the Dodd-Frank Act on

July 21, 2010, and introduced a broad range of new measures designed to improve the troubled

securities markets. As relevant here, Section 1502 of Dodd-Frank directed the SEC to develop

and promulgate a rule requiring greater transparency and disclosure regarding the use of

“conflict minerals” coming out of the DRC and its neighboring countries. Congress believed

that “the exploitation and trade of conflict minerals originating in the [DRC] is helping to finance

conflict characterized by extreme levels of violence in the eastern [DRC], particularly sexual-

and gender-based violence, and contributing to an emergency humanitarian situation.” Dodd-

Frank § 1502(a), 124 Stat. 2213. In Congress’s view, requiring companies “to make public and

1
Two groups—Amnesty International of the USA, Inc. and Amnesty International Limited
(“Intervenors”)—were also permitted to intervene on behalf of the Commission.
2
disclose annually to the Securities and Exchange Commission if the minerals in their products

originated or may have originated in Congo” will help “to ensure activities involving such

minerals did not finance or benefit armed groups.” 156 Cong. Rec. S3976 (May 19, 2010)

(statement of Sen. Feingold). Put another way, Congress concluded that this disclosure scheme

was “a reasonable step to shed some light on this literally life-and-death issue,” and believed that

it would “encourage companies using these minerals to source them responsibly.” 156 Cong.

Rec. S3817 (May 17, 2010) (statement of Sen. Durbin).

Dodd-Frank added Section 13(p) to the Securities and Exchange Act of 1934. See 15

U.S.C. § 78m(p). The statute directs the SEC to adopt regulations requiring companies that use

“conflict minerals” that are “necessary to the functionality or production” of their products, id. §

78m(p)(2)(B), to disclose to the Commission whether those minerals originated in the DRC or an

adjoining country, id. § 78m(p)(1)(A). If such “conflict minerals”—tantalum, tin, tungsten, and

gold 2—did originate in the DRC or an adjoining country, then companies must also submit an

additional report to the Commission containing a “description of the measures taken . . . to

exercise due diligence on the source and chain of custody of such minerals,” and “a description

of the products manufactured or contracted to be manufactured that are not DRC conflict free.”

Id. § 78m(p)(1)(A)(i)-(ii). Under the statute, “DRC conflict free” means that a product “does

not contain conflict minerals that directly or indirectly finance or benefit armed groups in the

[DRC] or an adjoining country.” Id. § 78m(p)(1)(D). The report must also describe “the

facilities used to process the conflict minerals, the country of origin of the conflict minerals, and

2
Both Dodd-Frank and the Final Rule define “conflict minerals” as “columbite-tantalite
(coltan), cassiterite, gold, wolframite, or their derivatives,” along with any other mineral or
derivative that the Secretary of State determines is “financing conflict” in the DRC. Dodd-Frank
§ 1502(e)(4), 124 Stat. 2218; see also 77 Fed. Reg. at 56,283-56,285. In their briefs, however,
the parties refer to the relevant minerals as the derivatives most commonly extracted from these
ores—tantalum, tin, tungsten, and gold. For simplicity’s sake, the Court does the same.

3
the efforts to determine the mine or location of origin with the greatest possible specificity.” Id.

§ 78m(p)(1)(A)(ii). Notably, the statute additionally requires that any disclosures or reports

provided to the SEC under these provisions must be made publicly available on the companies’

own Internet websites. Id. § 78m(p)(1)(E).

Along with the SEC, Section 1502 also created responsibilities for other federal agencies.

For example, the statute requires the Comptroller General to submit regular reports to Congress

assessing “the rate of sexual- and gender-based violence in war-torn areas” in and around the

DRC, and “the effectiveness of section 13(p) . . . in promoting peace and security” in the DRC

and surrounding countries. Dodd-Frank § 1502(d)(1)-(2), 124 Stat. 2216-17. In addition, the

Secretary of State is required to produce and make publicly available “a map of mineral-rich

zones, trade routes, and areas under the control of armed groups” in the DRC and adjoining

countries, and must also prepare and submit to Congress “a strategy to address the linkages

between human rights abuses, armed groups, mining of conflict minerals, and commercial

products.” Id. § 1502(c)(1)-(2), 124 Stat. 2215-16. 3

2. The Conflict Minerals Rule

Following the passage of Dodd-Frank, the Commission published its proposed rule a few

months later in December 2010. See Conflict Minerals, 75 Fed. Reg. 80,948 (Dec. 23, 2010).

During the rulemaking process, the SEC received more than 13,000 comment letters, and it also

3
Notably, this was not the first time Congress confronted these issues. Congress
previously considered two other bills focused on the illicit minerals trade in the DRC, although
neither was ultimately adopted. One would have implemented a ban on the importation of
certain products that contained or were derived from columbite-tantalite or cassiterite originating
in the DRC. See Conflict Coltan and Cassiterite Act of 2008, S. 3058, 110th Cong. (2008);
Conflict Minerals Trade Act, H.R. 4128, 111th Cong. §§ 6, 7 (2009). More recently, the Senate
considered a bill that, like the statute at issue here, would have required companies using
“conflict minerals” to make annual disclosures to the SEC. See Congo Conflict Minerals Act, S.
891, 111th Cong. § 5 (2009).

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convened a public roundtable to solicit feedback from interested stakeholders and industry

representatives; following the roundtable, the Commission requested additional comments. See

77 Fed. Reg. at 56,277-56,278. Ultimately, the SEC adopted the Final Rule (Rule 13p-1) by a 3-

2 vote on August 22, 2012, and published its Adopting Release—which spans nearly 100 pages

in the Federal Register—on September 12, 2012. Id. at 56,274-56,365.

a) Overview of the Final Rule

As set out in the Adopting Release, the SEC’s Conflict Minerals Rule can be broken

down into three overall steps, which the Court summarizes in turn.

At “Step One,” and as a threshold matter, companies must first determine whether they

are covered by the Rule’s requirements at all. The Final Rule only applies to “reporting”

companies—i.e., companies that “file reports with the Commission under Section 13(a) or

Section 15(c) of the Exchange Act,” 77 Fed. Reg. at 56,287—for which “conflict minerals are

necessary to the functionality or production of a product manufactured or contracted by that

issuer to be manufactured,” id. at 56,290. 4 It bears mentioning that the Commission considered

extending the Rule’s reach farther—observing that the statute “could be interpreted to apply to a

wide range of private companies not previously subject to [the SEC’s] disclosure and reporting

rules,” id. at 56,285—but ultimately thought the more reasonable interpretation was to limit the

Rule’s application to reporting issuers. The SEC also considered several other factors bearing on

the Rule’s scope. As relevant to this case, the Commission concluded that the Rule should not

be limited to issuers that directly manufacture products with necessary conflict minerals, but

should also reach issuers who contract to manufacture such products; the Commission also

4
The Adopting Release uses the term “issuers” when referring to entities covered by the
Rule. In this Opinion, the Court uses the terms “companies” and “issuers” interchangeably.

5
declined to adopt any type of categorical de minimis exception to the Rule’s coverage. See id. at

56,288-56,292, 56,295, 56,298.

After applying these coverage standards, issuers that are subject to the Conflict Minerals

Rule must proceed to “Step Two,” which requires covered issuers to conduct a “reasonable

country of origin inquiry” regarding their conflict minerals. Id. at 56,311. The Rule does not

precisely define what constitutes a “reasonable country of origin inquiry,” noting that it can

“differ among issuers based on the issuer’s size, products, relationships with suppliers, or other

factors,” and “depend[ing] on the available infrastructure at a given time.” Id. But the Rule does

provide some guidance. The inquiry “must be reasonably designed to determine whether the

issuer’s conflict minerals did originate in the Covered Countries, or did come from recycled or

scrap sources, and it must be performed in good faith.” Id. at 56,312. 5 As explained in the

Adopting Release, the Commission would “view an issuer as satisfying the reasonable country of

origin inquiry standard if it seeks and obtains reasonably reliable representations”—“either

directly from that facility or indirectly from the issuer’s immediate suppliers”—“indicating the

facility at which its conflict minerals were processed and demonstrating that those conflict

minerals did not originate in the Covered Countries or came from recycled or scrap sources.”

Id. 6 The Rule also confirms that an “issuer is not required to receive representations from all of

5
The term “Covered Countries” includes the DRC and its adjoining countries: Angola,
Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania,
Uganda, and Zambia. 77 Fed. Reg. at 56,275 nn.7-8
6
In crafting this approach, the Commission relied upon the due diligence framework
issued by the Organisation for Economic Cooperation and Development (“OECD”). 77 Fed.
Reg. at 56,312. (“The reasonable country of origin inquiry is consistent with the supplier
engagement approach in the OECD guidance where issuers use a range of tools and methods to
engage with their suppliers. The results of the inquiry may or may not trigger due diligence.”).
The OECD is an international economic coalition comprised of 34 member countries, including
the United States, focused on forging global standards and international agreements on matters of
economics, corporate governance, and more. At the time the Final Rule was adopted, the OECD
6
its suppliers,” emphasizing that the “standard focuses on reasonable design and good faith

inquiry.” Id. 7 The SEC, instead, expects issuers to take into account “warning signs” and “red

flags” suggesting that their minerals may have originated in the Covered Countries, or otherwise

“casting doubt” on the source of their minerals. Id. at 56,311-56,312 & n.448.

Depending on the results of a company’s reasonable country of origin inquiry, it may or

may not be required to proceed to the Rule’s third step. On the one hand, if, through its

reasonable country of origin inquiry, an issuer: (1) “determines that its necessary conflict

minerals did not originate in the Covered Countries or did come from recycled or scrap sources,”

or (2) “has no reason to believe that its conflict minerals may have originated in the Covered

Countries or reasonably believes that its conflict minerals are from recycled or scrap sources,”

then the issuer’s tracing obligations end there. Id. at 56,313 (emphasis added). The Rule simply

requires that the issuer disclose its determination to the Commission, briefly describing the scope

and results of its reasonable country of origin inquiry on a newly-created “Form SD.” Id. On the

other hand, if the issuer: (1) “knows” that its conflict minerals “originated in the Covered

Countries and did not come from recycled or scrap sources,” or (2) “has reason to believe” that

had developed “the only nationally or internationally recognized due diligence framework” on
the sourcing of conflict minerals. Id. at 56,281. The SEC’s Adopting Release references—and,
in some places, incorporates—aspects of the prior version of the OECD original guidance report,
but the current version is available through the OECD’s website. See OECD Due Diligence
Guidance for Responsible Supply Chains of Minerals From Conflict-Affected and High-Risk
Areas (2013), available at http://www.oecd.org/daf/inv/mne/GuidanceEdition2.pdf (addressing
supply chain management for “tin, tantalum, tungsten, their ores and mineral derivatives, and
gold”) (“OECD Due Diligence Guidance”). The OECD also separately publishes supplemental
guidance on the sourcing of gold. See OECD Due Diligence Guidance for Responsible Supply
Chains of Minerals From Conflict-Affected and High-Risk Areas: Supplement on Gold (2012),
available at http://www.oecd.org/daf/inv/mne/GoldSupplement.pdf.
7
As an example, the Commission agreed that “if reasonable inquiry had been made, and if
no evidence of [Covered Country] origin has arisen, and if the origin of only a small amount of
gold were still unknown, a manufacturer should be allowed to declare that its gold is not from the
[Covered Countries] and is DRC conflict free.” 77 Fed. Reg. at 56,312 (alterations in original).
7
its minerals “may have originated in the Covered Countries (and may not have come from

recycled or scrap sources),” then the issuer must proceed to the Rule’s third step. Id.

At “Step Three,” issuers must exercise “due diligence” in an effort to more definitively

determine “the source and chain of custody” of their conflict minerals. Id. While the SEC did

not expressly spell out the steps that must be taken to qualify as “due diligence,” the Final Rule

does require an issuer “to use a nationally or internationally recognized due diligence framework,

if such a framework is available for the specific conflict mineral.” Id. at 56,326. Specifically,

the Commission confirmed that the OECD due diligence guidance “satisfies [its] criteria and

may be used as a framework for purposes of satisfying the final rule’s requirement that an issuer

exercise due diligence in determining the source and chain of custody of its conflict minerals.”

Id. (citing OECD Due Diligence Guidance). Further, the Adopting Release confirms that a

“critical component of due diligence” is an independent, private sector audit designed to ensure

that the issuer’s due diligence “is in conformity with . . . [a] nationally or internationally

recognized due diligence framework,” and that the issuer’s actual due diligence efforts comport

with the due diligence approach described in its report. Id. at 56,320, 56,329. 8 Depending on

the information uncovered during the due diligence process, an issuer may then be required to

prepare a Conflict Minerals Report. If, following due diligence, “an issuer determines that its

conflict minerals did not originate in the Covered Countries or that its conflict minerals did come

from recycled or scrap sources, then no Conflict Minerals Report is required.” Id. at 56,312

(emphasis added). The issuer must still, however, prepare and submit a Form SD to the

8
The SEC did, however, authorize an exception to the mandatory audit component with
respect to minerals believed to have come from a recycled or scrap source. See 77 Fed. Reg. at
56,322 n.561 (“[A]n issuer exercising due diligence to determine whether a conflict mineral is
from a recycled or scrap source is not required to obtain an independent private sector audit of its
Conflict Minerals Report, regarding that conflict mineral, if there is no nationally or
internationally recognized due diligence framework for that recycled or scrap conflict mineral.”).
8
Commission describing the scope and results of its due diligence efforts. Id. By contrast, if the

issuer’s due diligence reveals that its minerals did originate in the Covered Countries and did not

come from recycled or scrap sources—or if the issuer cannot determine the source of its conflict

minerals through due diligence—then the issuer must prepare and submit a Conflict Minerals

Report to the SEC. Id. at 56,313.

The Conflict Minerals Report must include, among other matters, “a description of the

measures the issuer has taken to exercise due diligence on the source and chain of custody of

[its] conflict minerals,” accompanied by “a certified independent private sector audit.” Id. at

56,320. In addition, unless the issuer’s products can be identified as “DRC conflict free,” the

report must set forth “a description of the facilities used to process those conflict minerals, the

country of origin of those conflict minerals, and the efforts to determine the mine or location of

origin with the greatest possible specificity.” Id. An issuer’s Conflict Minerals Report must also

include a description of its products that have “not been found to be ‘DRC conflict free,’”

although issuers can include additional explanatory information they believe necessary or

appropriate. Id. at 56,322 (“[I]ssuers can add disclosure or clarification,” which “allows issuers

to include the statutory definition of ‘DRC conflict free’ in the disclosure to make clear that

‘DRC conflict free’ has a very specific meaning, or to otherwise address their particular

situation.”). On this last point, the Commission also authorized a temporary transition period

allowing companies unable to determine the origin of their conflict minerals to describe those

minerals as “DRC conflict undeterminable,” rather than as having “not been found to be ‘DRC

conflict free.’” Id. at 56,321. The Rule allows this alternative description for a two-year period

9
for all reporting issuers, and for a four-year period for “smaller” companies. Id. at 56,321-

56,322. 9

Significantly, the Rule does not require that companies place any type of label or

disclosure on products. Id. at 56,323 (“We note that many commentators appeared to believe

that the proposed rules would require that an issuer physically label its products as “DRC

conflict free” or not “DRC conflict free” . . . . The final rule does not require a physical label on

any product.”). Rather, these descriptions must be set forth in an issuer’s Conflict Minerals

Report, if at all, although a copy of the Conflict Minerals Report must also be publicly posted on

the company’s website, as well. See 15 U.S.C. § 78m(p)(1)(E); 77 Fed. Reg. at 56,362-56,363.

The Final Rule became effective on November 13, 2012, and the first reports and

disclosures it requires are due to be filed with the SEC by May 31, 2014. 77 Fed. Reg. at 56,274.

b) Significant Comments and Issues Considered by the Commission

Insofar as they are relevant to the claims Plaintiffs press in this case, the Court

summarizes some of the more significant comments and issues considered—and in some cases,

adopted—by the Commission during the rulemaking process.

First, many commentators urged the Commission to adopt a de minimis exception to the

Rule’s coverage, submitting a wide variety of proposed threshold amounts for the SEC’s

9
The Commission explained its rationale for adopting this temporary period as follows:
We are permitting this temporary category to address concerns of many industry
commentators that supply chain due diligence mechanisms have not yet been
established; and, therefore, many issuers will not be able to readily determine
whether their conflict minerals did not originate in the Covered Countries, did not
finance or benefit armed groups, or did come from recycled or scrap sources.
This temporary category should allow issuers time to establish [appropriate]
supply chain due diligence mechanisms.
77 Fed. Reg. at 56, 321. The Commission additionally believed that “this approach will allow
the final rule to more appropriately target the population of issuers from which Congress
intended to require this disclosure and will allow time for processes to be put in place so that
issuers may be able to determine the origin of their conflict minerals.” Id.
10
consideration. See 77 Fed. Reg. at 56,295, 56,298. For example, some commentators suggested

that an issuer should be exempt from coverage if the cost of conflict minerals in its products

makes up less than 1% of the issuer’s total production costs. Id. at 56,295. Some other

stakeholders recommended a de minimis exception applicable to “trace, nominal, or insignificant

amounts of conflict minerals” that are part of a company’s products. Id. And still other

commentators proposed the adoption of a de minimis exception in circumstances “when the

issuer is unable to determine the origin of only 5% of the product’s minerals,” “for products

containing less than 0.1% by weight of a conflict mineral,” and/or “if an issuer’s global usage of

conflict minerals comprised less than 0.01% of its materials.” Id. Ultimately, the Commission

declined to adopt any categorical de minimis exception as part of the Final Rule. Id. at 56,298.

In its view, a de minimis threshold would have been contrary to the Rule’s purpose, given that

the standard “focuses on whether the conflict mineral is ‘necessary’ to a product’s functionality

or production,” rather than “the amount of a conflict mineral contained in the product.” Id. The

SEC, in reaching this decision, also relied upon commentators’ indications that conflict minerals

“are often used in products in very limited quantities,” as well as the Commission’s own

“understand[ing] that there are instances in which only a minute amount of conflict minerals is

necessary for the functionality or production of a product.” Id.

In addition, the SEC received a number of comments encouraging the Commission not to

apply the Final Rule to companies that “contract to manufacture” products containing necessary

conflict minerals, but that do not “manufacture” such products directly. Id. at 56,289-56,290.

Despite the urging of those commentators, the Commission ultimately determined that the Rule

should apply to both categories of issuers—those that directly manufacture products containing

necessary conflict minerals, as well as those that contract to manufacture such products. Id. at

11
56,290. In so doing, the Commission declined to define “contract to manufacture” in the Final

Rule, believing such a definition would prove “unworkable.” Id. at 56,290-56,291. But the

Adopting Release does offer guidance. The SEC explained that the term “contract to

manufacture” only “include[s] issuers that have some actual influence over the manufacture of

their products.” Id. at 56,291. Consequently, the Commission explained that an issuer would not

be viewed as “contracting to manufacture a product” if “its actions involve no more than”: (a)

“[s]pecifying or negotiating contractual terms . . . that do not directly relate to the manufacturing

of the product, such as training or technical support, price, insurance, indemnity, intellectual

property rights, dispute resolution, or other like terms . . .”; (b) “[a]ffixing its brand, marks, logo,

or label to a generic product manufactured by a third party”; or (c) “[s]ervicing, maintaining, or

repairing a product manufactured by a third party.” Id. In the Commission’s view, this approach

avoids sweeping “pure retailer[s]” into the Rule’s scope, given that companies simply “offer[ing]

a generic product under [their] own brand name or a separate brand name” generally do not

“exert a sufficient degree of influence” over the manufacturing process. Id. at 56,292.

As another key point, the proposed rule would have required an issuer to undertake full-

blown due diligence efforts if, based on its reasonable country of origin inquiry, it was “unable to

determine that its conflict minerals did not originate in the Covered Countries.” Id. at 56,312.

Believing this framework would unreasonably require issuers to “prove a negative,” the

Commission ultimately concluded that such an “approach would arguably be more burdensome

than necessary to accomplish the [Rule’s] purpose,” and that “requiring a certainty in this setting

would not be reasonable and may impose undue costs.” Id. at 56,312-56,313. As a result, the

Final Rule incorporates the standard outlined above, whereby an issuer is excused from due

diligence obligations so long as it “has no reason to believe that its conflict minerals may have

12
originated in the Covered Countries,” or “reasonably believes that its conflict minerals are from

recycled or scrap sources.” Id. at 56,313. In the SEC’s view, this procedure struck the

appropriate balance: “This revised approach does not require an issuer to prove a negative to

avoid moving to [due diligence], but it also does not allow an issuer to ignore or be willfully

blind to warning signs or other circumstances indicating that its conflict minerals may have

originated in the Covered Countries.” Id.

Separately, the terms of the proposed rule also would have required issuers unable to

determine the source of their conflict minerals to describe their products in the Conflict Minerals

Report as “not DRC conflict free.” Id. at 56,317. Responding to commentators’ concerns that it

“would impose an unfair stigma” on companies that are forced to describe products as “not DRC

conflict free,” “particularly on issuers that did not know whether their minerals directly or

indirectly financed or benefited armed groups in the Covered Countries,” the Commission

modified the applicable language in the Final Rule. Id. at 56,322. Instead, issuers must now

explain that such products have “not been found to be ‘DRC conflict free’” (unless they rely

upon the alternative disclaimer of “DRC conflict undeterminable” during the temporary

transition period). Id. In the Commission’s view, this approach avoids incentivizing issuers to

“avoid determining the origins of the conflict minerals that they use,” while remaining faithful to

“Congress’s directive in Section 1502” of Dodd-Frank. Id. at 56,321. 10

10
Again, given the breadth and complexity of the issues addressed in the SEC’s Adopting
Release, this section summarizes only a small segment of the issues considered during the
rulemaking—those most germane to the claims before the Court. Curious readers should consult
the full Adopting Release in the Federal Register for a more comprehensive review.

13
 B. Procedural History

Plaintiffs initially filed this action with the U.S. Court of Appeals for the D.C. Circuit,

invoking 15 U.S.C. § 78y as the direct jurisdictional springboard to the Court of Appeals. While

the case was pending with the appellate court, however, the D.C. Circuit issued its decision in

American Petroleum Institute v. SEC, 714 F.3d 1329 (D.C. Cir. 2013), concluding that it lacked

jurisdiction over a direct challenge to a different SEC rule issued under Dodd-Frank. Id. at 1333.

The D.C. Circuit held that its original jurisdiction under Section 25 of the Exchange Act is

limited to challenges to “final orders issued by the Commission” and to challenges to “rules

promulgated pursuant to enumerated sections of the Act.” Id. Outside of those limited

circumstances, the Circuit explained, “a party must first proceed by filing suit in district court”

under the APA. Id. The American Petroleum decision was issued on April 26, 2013; four days

later—apparently reading the writing on the wall—Plaintiffs (then Petitioners) moved to transfer

the instant case to the U.S. District Court for the District of Columbia under 28 U.S.C. § 1631,

and the Circuit granted that request.

Following transfer of this matter to the undersigned on May 2, 2013, the Court directed

the parties to submit a status report outlining how they wished to proceed—and, in particular,

indicating whether any party desired to submit new or additional briefing, or whether the parties

preferred the Court to simply treat the briefs previously filed with the Court of Appeals as cross-

motions for summary judgment. (See Dkt. No. 2). The parties opted for the latter approach,

agreeing that there was no need for additional briefing; the parties requested that the Court treat

Plaintiffs’ (formerly Petitioners’) brief filed with the D.C. Circuit as a motion for summary

judgment, and the Commission’s and Intervenors’ appellate briefs as cross-motions for summary

judgment. (See Dkt. No. 9). The parties also requested expedited review of this case. (Id.). The

Court adopted this approach via Order on May 16, 2013, and set a hearing on the cross-motions
14
for July 1, 2013. The Court entertained argument from the parties for nearly three hours on the

1st of July, and took this matter under submission at that time. 11

ANALYSIS

This case presents two separate categories of claims for the Court’s review. First,

Plaintiffs challenge the SEC’s promulgation of the Conflict Minerals Rule under the APA,

claiming that the Commission ignored its statutory obligations under the Exchange Act in issuing

the Rule and that the Commission’s rulemaking was arbitrary and capricious in several other

respects. Second, Plaintiffs mount a constitutional attack against both the Final Rule and Section

1502 of Dodd-Frank, contending that the obligation for companies to publish their conflict

minerals disclosures on their own websites compels speech in violation of the First Amendment.

The Court discusses these two subjects separately below.

11
While the case was pending with the D.C. Circuit, several amici submitted briefs, some
supporting the Plaintiffs/Petitioners, and others supporting the Commission. Upon transfer, this
Court ruled that all amici that had filed briefs in the Court of Appeals under D.C. Circuit Rule
29(a) would be permitted to participate as amici in these proceedings. Accordingly, along with
the parties’ respective briefs, the Court also received amicus briefs from the following: (1)
Professor Marcia Narine, Ambassador Jendayi Frazer, and Dr. J. Peter Pham (in support of
Plaintiffs); (2) the “Industry Coalition”—American Coatings Association, Inc., American
Chemistry Council, Car Manufacturers Institute, Consumer Specialty Products Association,
National Retail Federation, Precision Machinated Products Association, and The Society of the
Plastics Industry, Inc. (in support of Plaintiffs); (3) Better Markets, Inc. (in support of the SEC);
(4) Global Witness Limited, Fred Robards, and Gregory Mthembu-Salter (in support of the
SEC); and (5) a group of Congressional amici—Sen. Barbara Boxer, Sen. Dick Durbin, former
Sen. Russ Feingold, former Rep. Howard Berman, Rep. Wm. Lacy Clay, Rep. Keith Ellison,
Rep. Raul Grijalva, Rep. John Lewis, then-Rep. (now Sen.) Ed Markey, Rep. Jim McDermott,
Rep. Gwen Moore, and Rep. Maxine Waters (in support of the SEC). Copies of these briefs can
be found in the case file transferred from the Court of Appeals, contained in the various
attachments at Docket Entry No. 1 on the Court’s electronic docket.
15
 A. Plaintiffs’ APA Claims

1. Applicable Standards of Review

“When ruling on a summary judgment motion in a case involving final review of an

agency action under the APA, the standards of Federal Rule of Civil Procedure 56(c) do not

apply because of the limited role of the court in reviewing the administrative record.” Int’l

Swaps & Derivatives Ass’n v. U.S. Commodity Futures Trading Comm’n, 887 F. Supp. 2d 259,

265-66 (D.D.C. 2012). Instead, “[s]ummary judgment serves as a mechanism for deciding, as a

matter of law, whether the administrative record supports the agency action and whether the

agency action is consistent with the APA standard of review.” Id. at 266 (citing Richards v. INS,

554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977)). Under the APA, agency action is unlawful if it is

“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2). The “arbitrary and capricious” standard of review is a narrow one, and it is well settled

that “a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). While the reviewing court must

conduct a “searching and careful” review, the agency’s action remains “entitled to a presumption

of regularity,” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16 (1971),

and the court “will not second guess an agency decision or question whether the decision made

was the best one,” C & W Fish Co. v. Fox, 931 F.2d 1556, 1565 (D.C. Cir. 1991). But the court

must nevertheless be satisfied that the agency “examine[d] the relevant data and articulate[d] a

satisfactory explanation for its action including a rational connection between the facts found and

the choice made.” State Farm, 463 U.S. at 43; see also Nat’l Ass’n of Home Builders v. EPA,

682 F.3d 1032, 1036 (D.C. Cir. 2012).

Moreover, where a case turns on the agency’s interpretation of a statute it is charged with

implementing, courts apply the well-worn, two-part Chevron test. Chevron U.S.A. Inc. v.

16
Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). Under Chevron Step One, the court must

first determine “whether Congress has directly spoken to the precise question at issue.” Id. at

842; Pub. Citizen v. Nuclear Regulatory Comm’n, 901 F.2d 147, 154 (D.C. Cir. 1990). If so,

then the court’s inquiry ends, and the clear and unambiguous statutory language controls. See

Northeast Hosp. v. Sebelius, 657 F.3d 1, 4 (D.C. Cir. 2011) (citing Chevron, 467 U.S. at 842-43).

In answering this question, the court reviews the statute de novo, “employing traditional tools of

statutory construction,” Nat’l Ass’n of Clean Air Agencies v. EPA, 489 F.3d 1221, 1228 (D.C.

Cir. 2007), by assessing “the statutory text at issue, the statute as a whole, and . . . legislative

history where appropriate,” Int’l Swaps, 887 F. Supp. 2d at 268 (internal citations omitted); see

also Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997) (characterizing the Chevron

Step One inquiry “as a search for the plain meaning of the statute”). If the statute is ambiguous,

however, then the analysis shifts to Chevron Step Two, whereby the reviewing court must

consider “whether the agency’s [interpretation] is based on a permissible construction of the

statute.” Chevron, 467 U.S. at 843; see also Peter Pan Bus Lines v. FMSCA, 471 F.3d 1350,

1353 (D.C. Cir. 2006). Under Chevron, “[a] statute is ambiguous if it can be read more than one

way.” Am. Fed’n of Labor & Cong. of Indus. Org.v. Fed. Election Comm’n, 333 F.3d 168, 173

(D.C. Cir. 2003). “Because the judiciary functions as the final authority on issues of statutory

construction, an agency is given no deference at all on the question whether a statute is

ambiguous.” Wells Fargo Bank, N.A. v. Fed. Deposit Ins. Corp., 310 F.3d 202, 205-06, (D.C.

Cir. 2002) (internal citations and quotation marks omitted).

2. The SEC’s Statutory Obligations Under The Exchange Act

Plaintiffs’ briefing opens with an overarching challenge to the Commission’s

promulgation of the Conflict Minerals Rule: they argue that the SEC failed to “analyze properly

17
the costs and benefits” of the Rule as a whole, ostensibly in contravention of its statutory

directives under the Exchange Act. (Pls.’ Brief at 26-27). From Plaintiffs’ view, “[t]he

Commission had to conduct an adequate analysis of the overall costs and benefits of the rule,

including the alternatives it adopted, in order to satisfy its statutory obligations and exercise its

authority in a reasoned manner.” (Id. at 26). They claim that the Commission shirked its

statutory obligations to consider “whether the action will promote efficiency, competition, and

capital formation,” 15 U.S.C. § 78c(f), and to ensure that the Rule would not “impose a burden

on competition not necessary or appropriate in furtherance of the purposes of” the Exchange Act,

id. § 78w(a)(2). Plaintiffs argue that the SEC was required by the Exchange Act to

independently determine whether the rule was “necessary or appropriate . . . to decrease the

conflict and violence in the DRC.” (Pls.’ Reply at 4). As Plaintiffs see it, the Commission

abdicated this responsibility and improperly deferred to “Congress’s determination that conflict

minerals disclosure will yield social benefits in the form of decreasing conflict and violence in

the DRC,” (id. at 3), and “failed to even conclude that [its] choices will improve conditions in the

DRC at all,” (Pls.’ Brief at 33). By supposedly ducking this statutory obligation, Plaintiffs

contend, the Commission’s decision-making was arbitrary and capricious, necessitating vacatur

of the Conflict Minerals Rule. The Court disagrees. 12

To begin with, Sections 3(f) and 23(a)(2) of the Exchange Act simply do not mandate the

type of analysis Plaintiffs claim was lacking here. Section 3(f) provides that whenever “the

Commission is engaged in rulemaking . . . and is required to consider or determine whether an

action is necessary or appropriate in the public interest, the Commission shall also consider, in

12
The Court finds it somewhat telling that Plaintiffs devoted almost no attention to this
particular theory during oral argument—never so much as invoking 15 U.S.C. §§ 78c(f) or
78w(a)(2) during their presentation. Instead, Plaintiffs focused on the specific challenges to
particularized aspects of the Final Rule, which the Court tackles in the sections that follow.

18
addition to the protection of investors, whether the action will promote efficiency, competition,

and capital formation.” 15 U.S.C. § 78c(f) (emphasis added). And Section 23(a)(2) states that

the Commission shall, “in making rules and regulations . . . [,] consider among other matters the

impact any such rule or regulation would have on competition,” and “shall not adopt any such

rule or regulation which would impose a burden on competition not necessary or appropriate in

furtherance of the purposes” of the Act. Id. § 78w(a)(2) (emphasis added). By their terms, these

provisions only obligate the SEC to “consider” the impact that a rule or regulation may have on

various economic-related factors—efficiency, competition, and capital formation. In doing so,

the Commission may deem it appropriate (or even necessary) to weigh the costs and benefits of

its proposed action as related to these enumerated factors, but to suggest that the Exchange Act

mandates that the SEC conduct some sort of broader, wide-ranging benefit analysis simply reads

too much into this statutory language. This is particularly true here, where the resulting benefits

Plaintiffs accuse the Commission of ignoring relate to humanitarian objectives that Congress

concluded would be achieved by the rulemaking, rather than some sort of economic objectives

underlying the Commission’s rule. (See, e.g., Pls.’ Brief at 1 (complaining that the SEC “did not

determine whether the rule will provide any benefits to the people of the DRC”) (emphasis in

original); id. at 23 (“[T]he Commission imposed these enormous costs without determining

whether the rule would yield any benefits for the Congolese people.”) (emphasis in original);

Pls.’ Reply at 1-2 (“[T]he Commission failed to assess whether these determinations would yield

any benefits or instead make a tragic humanitarian situation even worse.”) (emphasis in

original)). Simply put, there is no statutory support for Plaintiffs’ argument that the Commission

19
was required to evaluate whether the Conflict Minerals Rule would actually achieve the social

benefits Congress envisioned. 13

Nor is Plaintiffs’ argument reinforced by any of the Circuit precedent they cite. It is true,

as Plaintiffs assert, that our Court of Appeals has emphasized the SEC’s “statutory obligation to

determine as best it can the economic implications of its rule.” Bus. Roundtable v. SEC, 647

F.3d 1144, 1148 (D.C. Cir. 2011) (emphasizing the Commission’s “unique obligation to consider

the effect of a new rule upon ‘efficiency, competition, and capital formation,’” under 15 U.S.C.

§§ 78c(f) & 78w(a)(2)); see also Am. Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166, 176-77

(D.C. Cir. 2010) (applying Securities Act’s companion provision, 15 U.S.C. § 77b(b), which

similarly requires the SEC to consider “efficiency, competition, and capital formation”);

Chamber of Commerce v. SEC, 412 F.3d 133, 143 (D.C. Cir. 2005) (construing companion

provision of the Investment Company Act, 15 U.S.C. § 80a-2(c), which tracks the same

language). In this vein, the D.C. Circuit has: invalidated a rule based on the Commission’s

failure “to estimate and quantify the costs it expected companies to incur,” and its “ducking

serious evaluation of the costs that could be imposed upon companies,” Bus. Roundtable, 647

F.3d at 1150, 1152; vacated a rule due to the SEC’s failure to conduct “an analysis of whether

the specific rule will promote efficiency, competition, and capital formation,” Am. Equity, 613

F.3d at 178 (emphasis in original); and struck down a regulation because the SEC failed to

determine a “range within which a fund’s cost of compliance will fall,” which the court found

13
For this same reason, Plaintiffs’ reliance on Public Citizen v. Federal Motor Carrier
Safety Administration, 374 F.3d 1209 (D.C. Cir. 2004), is equally misplaced. In Public Citizen,
the Circuit invalidated an FMCSA rule concerning commercial motor vehicles because the
FMCSA clearly failed to consider an issue during the rulemaking—driver health and safety—
that it was expressly required to consider by statute. Id. at 1216-17. Setting aside the fact that
the portions of Public Citizen cited by Plaintiffs are plainly dicta, that decision is inapposite
because, unlike the FMCSA in Public Citizen, the Commission had no statutory obligation to
evaluate the humanitarian impact and social benefits of the Conflict Minerals Rule.
20
“would be pertinent to its assessment of the effect the condition would have upon efficiency and

competition, if not capital formation,” Chamber of Commerce, 412 F.3d at 143-44. As should be

clear, however, all of those cases involved shortcomings on the Commission’s part with respect

to the economic implications of its actions—economic implications that the SEC was statutorily

required to consider in adopting the challenged rules. By contrast, none of those decisions lends

support to Plaintiffs’ theory that the Conflict Minerals Rule must be invalidated because the SEC

failed to consider whether the Rule would actually achieve the humanitarian benefits identified

by Congress. 14

Plaintiffs also fail to account for another important distinction between those decisions

and the case at bar. All of those cases 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. See Bus. Roundtable, 647 F.3d at 1146 (reviewing proxy rule adopted by

the SEC based on its belief that “the current process impede[d] the expression of shareholders’

right under state corporation laws to nominate and elect directors”); Am. Equity, 613 F.3d at 170-

14
The Commission appropriately recognized this distinction in its Adopting Release,
explaining that:
Congress intended for the rule issued pursuant to Section 1502 to decrease the
conflict and violence in the DRC, particularly sexual and gender based violence. A
related goal of the statute is the promotion of peace and security in the Congo. These
are compelling social benefits, which we are unable to readily quantify with any
precision, both because we do not have the data to quantify the benefits and because
we are not able to assess how effective Section 1502 will be in achieving those
benefits. We also note that these objectives of Section 1502 appear to be directed at
achieving overall social benefits and are not necessarily intended to generate
measurable, direct economic benefits to investors or issuers specifically.
Additionally, the social benefits are quite different from the economic or investor
protection benefits that our rules ordinarily strive to achieve.
77 Fed. Reg. at 56,350 (emphasis added); see also id. (“[U]nlike in most of the securities laws,
Congress intended the Conflicts Mineral Provision to serve a humanitarian purpose, which is to
prevent armed groups from benefiting from the trade of conflict minerals.”).
21
71 (invalidating “Rule 151A,” through which the SEC “sought to ensure that purchasers of [fixed

index annuities] would be entitled to the full protection of the federal securities laws”); Chamber

of Commerce, 412 F.3d at 137 (reviewing rule amending mutual fund regulations based on the

SEC’s belief that “more was required” due to a “serious breakdown in management controls”).

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. As a result, the SEC rightly maintains that its role was not to “second-

guess” Congress’s judgment as to the benefits of disclosure, but to, instead, promulgate a rule

that would promote the benefits Congress identified and that would hew closely to that

congressional command. See Pub. Citizen v. FTC, 869 F.2d 1541, 1557 (D.C. Cir. 1989)

(“[A]gencies surely do not have inherent authority to second-guess Congress’ calculations.”);

Kimberlin v. U.S. Dep’t of Justice, 150 F. Supp. 2d 36, 48 (D.D.C. 2001) (same).

Therefore, while Plaintiffs inveigh against the Commission’s apparent disregard for its

“statutory mandate” in failing to assess whether the Conflict Minerals Rule would actually

achieve the benefits Congress identified, this argument rests on a false premise. The Exchange

Act imposes no such statutory obligation. And framed appropriately, the Court is easily

convinced that the Commission discharged any potential responsibility to consider whether the

Final Rule will “promote efficiency, competition, and capital formation,” and that the

Commission appropriately considered the Rule’s impact on competition more generally, as

22
required by the Exchange Act. See 15 U.S.C. §§ 78c(f), 78w(a)(2). 15 Indeed, Plaintiffs do not

meaningfully contest these points.

First, the Adopting Release confirms that the Commission considered the Rule’s impact

on efficiency, explaining “that the required disclosure will help investors in pricing the securities

of the issuers subject to the Conflict Minerals Statutory Provision” and “could improve

informational efficiency.” 77 Fed. Reg. at 56,350. On the other hand, the SEC posited that

because “the cost of compliance for this provision will be borne by the shareholders of the

company,” the Rule could “divest capital away from other productive opportunities” and “may

15
In the Court’s view, it is not clear that the requirements of Section 3(f) even apply to this
rulemaking in the first place. By its terms, this provision is only triggered when the Commission
“is required to consider or determine whether an action is necessary or appropriate in the public
interest.” 15 U.S.C. § 78c(f). Here, the Commission was not required to make such a
consideration or determination; in a sense, Congress had already done so, concluding that the
conflict minerals disclosure scheme was “necessary” and/or “appropriate in the public interest.”
See Dodd-Frank § 1502(a), 124 Stat. 2213 (explaining Congress’s belief that the “emergency
humanitarian situation” in the Democratic Republic of the Congo “warrant[ed] the provisions of
section 13(p) of the Securities Exchange Act”). Absent such a requirement on the Commission’s
part, it seems that Section 3(f)’s directive to consider the Rule’s effect on “efficiency,
competition, and capital formation” would not have even been triggered. Moreover, as reflected
in other provisions of the Exchange Act, when Congress expects the SEC to undertake this type
of analysis, it expressly uses the phrase “as necessary or appropriate in the public interest” in the
relevant statute. See, e.g., 15 U.S.C. § 78f(a) (authorizing the Commission to issue rules and
regulations related to an entity’s registration with the SEC “as necessary or appropriate in the
public interest”); id. § 78l(b)(1) (empowering the SEC to promulgate rules surrounding the
information required to register securities with the Commission, “as necessary or appropriate in
the public interest”); id. § 78m(q)(2)(D)(ii)(VII) (authorizing the Commission to promulgate
rules “necessary or appropriate in the public interest” related to a disclosure regime concerning
“resource extraction issuers”). Congress did not use such language here.
Nevertheless, insofar as the Commission considered itself subject to the requirements of
Section 3(f), along with those under Section 23(a)(2), (see Def.’s Brief at 29), the Court need not
conclusively decide this issue. Since the SEC conducted an analysis under Section 3(f) in
adopting the Final Rule without any suggestion that such an analysis was not required, the Court
evaluates the propriety of the Commission’s analysis as performed, including its compliance
with 15 U.S.C. § 78c(f). Am. Equity, 613 F.3d at 177 (“[T]he SEC must defend its analysis
before the court upon the basis it employed in adopting that analysis.”). However, this should
not be taken as a ruling that such an analysis was actually required in connection with this
particular rulemaking.
23
result in a loss of allocative efficiency,” although such loss might be offset “by increased demand

for the firm’s products and/or shares by socially conscious consumers and investors.” Id.

Second, the Commission considered whether the Rule would “have a significant impact on

capital formation,” explaining that it “[did] not expect that the rule would negatively impact

prospects of the affected industries to the extent that would result in withdrawal of capital from

these industries.” Id. at 56,350-56,351. And third, the Commission considered the Rule’s effect

on competition, noting that “issuers with a reporting obligation under the Conflict Minerals

Statutory Provision could be put at a competitive disadvantage with respect to private companies

that do not have such an obligation.” Id. at 56,350. The SEC also observed that “the

implementation of the statute may provide significant advantage to foreign companies that are

not reporting in the United States . . . but do compete directly with reporting issuers in the United

States.” Id. But on balance, the SEC concluded that “to the extent the final rule implementing

the statute imposes a burden on competition in the industries of affected issuers,” it “believe[d]

the burden is necessary and appropriate in furtherance of the purposes of Section 13(p).” Id.

Therefore, upon review of the record, the Court is convinced that the Commission

appropriately considered the various factors that Sections 3(f) and 23(a)(2) of the Exchange Act

actually require. No statutory directive obligated the Commission to reevaluate and

independently confirm that the Final Rule would actually achieve the humanitarian benefits

Congress intended. Rather, the SEC appropriately deferred to Congress’s determination on this

point, and its conclusion was not arbitrary, capricious, or contrary to law—whether because of

some statutory directive under the Exchange Act or otherwise.

24
 3. The Commission’s Estimation of Particular Costs

Plaintiffs next argue—albeit somewhat weakly—that the Commission arbitrarily

underestimated some aspects of the Rule’s costs. Parroting language from our Circuit, Plaintiffs

accuse the Commission of “inconsistently and opportunistically fram[ing] the costs” of the Rule

and “fail[ing] adequately to quantify the certain costs.” (Pls.’ Brief at 31) (quoting Bus.

Roundtable, 647 F.3d at 1148-49). In particular, Plaintiffs focus on two aspects of the

Commission’s cost analysis: information technology (“IT”) costs and the estimated number of

suppliers that will be impacted by the Rule. As Plaintiffs see it, the Commission arbitrarily

rejected the estimates that NAM submitted during the rulemaking process “simply because other

commenters provided lower estimates.” (Pls.’ Reply at 8). These arguments miss the mark.

As a general matter, the Court disagrees that the Commission simply rejected NAM’s

estimates out of hand, as Plaintiffs assert. Upon receiving four separate cost estimates from

commentators (including one from NAM), the Commission noted the “wide divergence” among

the various analyses, ranging from $387 million to $16 billion. 77 Fed. Reg. at 56,351. As set

forth in the Adopting Release, the Commission believed that “a combination of the analyses

[would] provide a useful framework for understanding various cost components,” and it

“strive[d] to achieve a balanced and reasonable analysis based on the data and assumptions

provided by all commentators, as well as [the Commission’s] own analysis and assumptions.”

Id. Moreover, while the Commission placed particular emphasis on two studies—those prepared

by NAM and by Tulane University—it noted that “even these two studies did not provide

sufficiently documented evidence to support all of their assumptions and assertions.” Id. As a

consequence, the SEC took “into account the views expressed in other comment letters, and

made modifications to the analyses provided by the manufacturing industry association and

university group commentators accordingly.” Id. This approach, the Commission concluded,
25
“better synthesize[d] the information provided to [it] in the comment process.” Id. This

methodology strikes the Court as eminently appropriate, which means that Plaintiffs are left to

argue that certain, specific aspects of the Commission’s calculations were arbitrary and

unreasonable. They fare no better on that front.

First, with respect to the IT costs, the Commission noted that “an important

consideration” in these estimates was the “cost of upgrading or implementing changes to IT

systems.” Id. While the Commission initially looked to the IT cost estimates submitted by

NAM and by Tulane University, it believed that those figures “may have been over-inclusive,”

given the input of other commentators who pointed out that: (1) “conflict minerals software for

small companies can be downloaded for free”; (2) the systems used in NAM’s and Tulane’s

studies were “the most expensive systems on the market”; and (3) many companies interviewed

“would not need to invest in new software solely for conflict minerals.” Id. But neither did the

Commission accept, hook-line-and-sinker, the lower estimates submitted by those other

commentators. Instead, the SEC struck what it believed to be the right balance among all the

estimates submitted: “[W]e do not intend to replace the manufacturing industry association and

university group commentators’ cost estimates with the smaller estimate provided; rather, for

purposes of our cost estimate, the appropriate estimate lies somewhere in between those two

estimates.” Id. While Plaintiffs may believe the Commission got it wrong, their disagreement

does not render the SEC’s analysis on this point arbitrary or unreasonable.

Nor was the Commission’s analysis of the total number of affected first-tier suppliers

improper. While NAM’s study estimated that each issuer had an average of 2,000 first-tier

suppliers, the Commission found that number “not supported by other estimates” and “difficult

to reconcile with figures reported by other commentators.” Id. at 56,352. At the same time, the

26
SEC also declined to accept the lower figure proffered by another commentator: “[We] do think

a prudent reduction in the manufacturing industry association commentator’s estimate is

warranted, but here again, we do not know that 163 is any more representative of an average

company’s experience.” Id. In turn, the Commission relied upon Tulane University’s estimate

of 1,060 average suppliers, which it found most reasonable. Id. In so doing, the Commission

weighed comments received from the various parties and exercised its discretion in concluding

which figures were most appropriate. While Plaintiffs, again, may disagree, the Court cannot say

that the SEC acted arbitrarily or capriciously in reaching this particular estimate.

4. The De Minimis Threshold

Plaintiffs next complain that the Commission wrongly failed to implement any type of a

de minimis exemption from the Conflict Minerals Rule’s coverage. Their attack on this front is

twofold. They first contend that the Commission believed the statute unambiguously foreclosed

any de minimis threshold, when, according to Plaintiffs, Congress actually left that determination

up to the SEC. Because the Commission wrongly treated the statute as unambiguous and

thought itself precluded from even considering a de minimis exception, Plaintiffs argue, the

Court should not afford the SEC’s determination any deference and should instead remand to the

agency for further proceedings. Second, Plaintiffs insist that even if the Commission did

exercise its discretion on this point, its analysis of the de minimis issue was arbitrary and cannot

survive APA review. In particular, Plaintiffs take issue with the Commission’s allegedly

conclusory rationale, and they fault the Commission for failing to conduct any meaningful

analysis of the various de minimis proposals submitted during the rulemaking process. The

Court considers each of these arguments in turn.

27
 Beginning with Plaintiffs’ opening theory, they maintain that Dodd-Frank § 1502 is

silent, or at least ambiguous, as to the propriety of the SEC adopting a de minimis threshold as

part of the Final Rule. In support, Plaintiffs argue that the statute “does not forbid” or

unambiguously foreclose the use of a de minimis exception, which, in their view, is an indication

that “[t]he Commission plainly had power to adopt a de minimis exception.” (Pls.’ Reply at 11).

According to Plaintiffs, the SEC therefore could have looked to its general exemptive authority

under the Exchange Act, through which the Commission can “exempt . . . any class or classes of

persons, securities, or transactions, from any provision or provisions of [the Exchange Act] or of

any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in

the public interest, and is consistent with the protection of investors.” 15 U.S.C. § 78mm(a)(1);

see also id. § 78l(h) (authorizing exemptions from several provisions of the Act, including

Section 13, “upon such terms and conditions and for such period as it deems necessary or

appropriate,” provided “that such action is not inconsistent with the public interest or the

protection of investors”). Alternatively, Plaintiffs contend that the Commission could have

relied on its inherent authority, under general principles of administrative law, to create a de

minimis exception. See, e.g., Ala. Power Co. v. Costle, 636 F.2d 323, 360-61 (D.C. Cir. 1979);

Ass’n of Admin. Law Judges v. FLRA, 397 F.3d 957, 962 (D.C. Cir. 2005) (“As long as the

Congress has not been ‘extraordinarily rigid’ in drafting the statute . . . ‘there is likely a basis for

an implication of de minimis authority to provide [an] exemption when the burdens of regulation

yield a gain of trivial or no value.’”) (quoting Envt’l Def. Fund, Inc. v. EPA, 82 F.3d 451, 466

(D.C. Cir. 1996)) (alterations in original).

Plaintiffs argue the Commission wrongly ignored these precepts and “concluded that it

lacked authority” and was “precluded from considering” any de minimis exception as part of the

28
Final Rule. (Pls.’ Brief at 35). To this end, Plaintiffs point to several statements by the SEC

within the Adopting Release:

• “The statute itself does not contain a de minimis exception, and for several
reasons we believe it would be contrary to the Conflict Minerals Statutory
Provision and Congressional purpose to include one,” 77 Fed. Reg. at 56,298;

• “If [Congress] had intended that the provision be limited further, so as not to
apply to a de minimis use of conflict minerals, we think Congress would have
done so explicitly,” id.; and

• “[W]e are of the view that Congress intended not to provide for a de minimis
exception, and including one in the final rule would therefore thwart, rather
than advance, the provision’s purpose,” id.

In this same vein, Plaintiffs also highlight several passages from the SEC’s briefing in this case:

• “[T]he Commission’s broader conclusion that consistent with the views of the
State Department, we believe Congress intended the disclosure provisions to
apply to the use of even smaller amounts of conflict minerals originating in
the Covered Countries necessarily precluded the adoption of any of the de
minimis thresholds,” (Pls.’ Reply at 11) (quoting Def.’s Brief at 48) (internal
citations and quotation marks omitted);

• “It was not for the Commission, through de minimis exemptive authority, to
find that Congress overreached and to bring the statutory requirements back
into line,” (Id.) (quoting Def.’s Brief at 46); and

• Highlighting the SEC’s decision not “to create a de minimis exception based
on its analysis of the ‘text, structure, and purposes of Section 1502,’” (Id.)
(citing and quoting Def.’s Brief at 16, 43).

Plaintiffs insist that these statements betray the SEC’s unambiguous treatment of the statute

during the rulemaking process.

For its part, the Commission recognizes its general powers of exemptive authority—both

expressly under the Exchange Act and impliedly under general APA principles. But the

Commission disagrees that it believed Congress, through Section 1502, unambiguously

foreclosed the use of those powers in the Conflict Minerals Rule. According to the SEC, it “did

not conclude that it ‘lacked authority’ to create or that it ‘was precluded from considering’ a de

29
minimis exception.” (Def.’s Brief at 44). Instead, the Commission rejoins that it exercised

discretion in interpreting the statute, “appropriate[ly] examined whether such an exception would

further the disclosure scheme Congress envisioned,” and reasonably concluded that there was

“ample reason to decline to create such an exception under either its general or its inherent

authority.” (Id. at 46). Since neither side contends that Congress clearly and unambiguously

answered the question of whether a de minimis exception could be adopted as part of the Conflict

Minerals Rule, the Court need not embark on a full-blown analysis under Chevron Step One.

Rather, as do the parties, the Court treats the statute as silent on the de minimis issue. Ordinarily,

the Court would therefore proceed to Chevron Step Two and determine whether the

Commission’s interpretation is “a permissible construction of the statute.” Chevron, 467 U.S. at

863. But Plaintiffs insist that the Court’s analysis must stop here.

On this point, Plaintiffs are correct that “deference to an agency’s interpretation of a

statute is not appropriate when the agency wrongly ‘believes that interpretation is compelled by

Congress.’” Peter Pan, 471 F.3d at 1354 (quoting PDK Labs., Inc. v. U.S. Drug Enforcement

Admin., 362 F.3d 786, 798 (D.C. Cir. 2004)). Rather, “Chevron step 2 deference is reserved for

those instances when an agency recognizes that the Congress’s intent is not plain from the

statute’s face.” Id.; see also Sec’y of Labor v. Nat’l Cement Co. of Cal., 494 F.3d 1066, 1073

(D.C. Cir. 2007) (applying these principles where the agency “incorrectly treated the statute as

unambiguous and interpreted it accordingly”); State of Ariz. v. Thompson, 281 F.3d 248, 253-54

(D.C. Cir. 2002) (no Chevron deference accorded where agency “believe[d] that the statute

clearly bar[red]” a contrary interpretation, and that it was “without discretion to reach another

result”). Plaintiffs also rightly observe that, in such circumstances, the appropriate course of

action is for a court to remand to the agency “to interpret the statutory language anew.” Peter

30
Pan, 471 F.3d at 1354; see also Int’l Swaps, 887 F. Supp. 2d at 280-81. In Plaintiffs’ view, this

is precisely what transpired here. The Commission disagrees. The question for the Court,

therefore, becomes whether, as Plaintiffs see things, the SEC treated Section 1502 as

unambiguous on the de minimis issue and felt “without discretion to reach another result,” or

whether, as the Commission contends, it exercised its discretion in finding a de minimis

exception inappropriate. On balance, the SEC has the better of this argument.

Most significantly, the language used by the Commission is a far cry from the type of

definitive, declarative agency statements that our Circuit has described as a conclusion that the

agency treated a statute as unambiguous. Plaintiffs do not identify any clear statement—either in

the Adopting Release or in the SEC’s briefing before the Court—showing that the Commission

believed its interpretation was “plainly” required by the statute. Contra Peter Pan, 471 F.3d at

1353 (relying on agency statement that “[t]his interpretation is not consistent with the plain

language of the statute”) (emphasis in original); Nat’l Cement, 494 F.3d at 1074 (pointing to

agency declaration that “the definition of ‘coal or other mine’ plainly includes a road such as the

one at issue”) (emphasis in original). Nor do Plaintiffs point to any statement on the

Commission’s part evincing a belief that the statute “[did] not permit” a contrary interpretation.

Contra Peter Pan, 471 F.3d at 1353 (relying on agency statement that a statute “does not permit

FMCSA to withhold registration for failure to comply with ADA requirements”) (emphasis in

original); State of Ariz., 281 F.3d at 253 (looking to agency remark that “the TANF legislation . .

. does not permit it being designated as the . . . primary program”) (emphasis in original);

Transitional Hosps. Corp. of La. v. Shalala, 222 F.3d 1019, 1029 (D.C. Cir. 2000) (relying on

agency’s statement that “[w]e do not believe that the statute permits us to extend the exclusion

for long-term care hospitals”) (emphasis in original). At best, the language Plaintiffs highlight

31
demonstrates that the Commission considered, as one part of its decision-making process, what it

believed Congress’s intent to have been in enacting Section 1502. True, the Commission

deployed traditional tools of statutory construction in doing so, looking to Congressional intent

and legislative history. But it is entirely appropriate for an agency, in the course of construing a

statute it is charged with implementing, to consider whether a particular interpretation is

consistent with the statute’s purpose. See Vill. of Barrington v. Surface Transp. Bd., 636 F.3d

650, 665-66 (D.C. Cir. 2011) (explaining that agency’s parsing of statutory language to discern

Congress’s intent, along with its consideration of legislative history, “appropriately guide[d]

[the] agency in interpreting an ambiguous statute”); see also Northpoint Tech., Ltd. v. FCC, 412

F.3d 145, 151 (D.C. Cir. 2005) (“A ‘reasonable’ explanation of how an agency’s interpretation

serves the statute’s objectives is the stuff of which a ‘permissible’ construction is made.”) (citing

Cont’l Air Lines v. Dep’t of Transp., 843 F.2d 1444, 1452 (D.C. Cir. 1988)). This is all the

Commission did here.

While the Court is mindful that the Commission did not explicitly indicate its belief that

Section 1502 was ambiguous on the de minimis issue, our Circuit has expressly rejected the

notion that “an assertion of ambiguity is required” by an agency in order to merit deference

under Chevron Step Two. See Braintree Elec. Light Dep’t v. FERC, 667 F.3d 1284, 1288-89

(D.C. Cir. 2012) (“As long as the text is ambiguous and the agency does not insist that it is clear,

a reasonable interpretation will warrant our deference.”).

Further, Plaintiffs’ argument overlooks the fact that the Commission’s Adopting Release

set forth additional policy-based and practical reasons underlying its belief that the adoption of a

de minimis exception would be inappropriate. Relying on commentators’ feedback that conflict

minerals “are often used in products in very limited quantities,” the SEC determined that

32
“including a de minimis threshold could have a significant impact on the final rule.” 77 Fed.

Reg. at 56,298; see also id. (“[W]e understand that there are instances in which only a minute

amount of conflict minerals is necessary for the functionality or production of a product.”). The

Commission would have felt no need to discuss these reasons if it believed itself congressionally

hamstrung from exercising its discretion on this issue. It also bears noting that, in its Proposing

Release, the Commission sought comment “as to whether there should be a de minimis threshold

in [the] rules based on the amount of conflict minerals used by an issuer in a particular product or

in its overall enterprise and, if so, whether such a threshold would be consistent with the Conflict

Minerals Statutory Provision.” 77 Fed. Reg. at 56,293. If the Commission truly thought itself

foreclosed from even considering a de minimis threshold, then there would have been no reason

to solicit feedback on the issue as part of the rulemaking process. Taking all of these factors into

account, the Court concludes that the Commission did not believe its “interpretation [was]

compelled by Congress,” Peter Pan, 471 F.3d at 1354, but that the Commission instead

exercised its independent judgment in declining to adopt a de minimis exception. 16

As such, the Court’s focus turns to Chevron Step Two, asking whether the Commission’s

interpretation of Section 1502 on this issue was permissible. The Court need not tarry here long.

16
Plaintiffs additionally point to the fact that the Commission failed to include any
discussion of the de minimis issues in the section of the Adopting Release entitled “Benefits and
Costs Resulting From Commission’s Exercise of Discretion.” (See Pls.’ Reply at 10)
(referencing 77 Fed. Reg. at 56,342-56,350). This argument is unavailing. For one thing, the
Commission did not purport to summarize all of its discretionary decisions in that section,
making clear instead that the SEC was focused on what it believed to be “the most significant
choices [it] made in implementing the statute and the associated costs and benefits.” 77 Fed.
Reg. at 56,342 (emphasis added). Perhaps in the SEC’s mind, the de minimis issue did not
qualify as a “significant choice[],” particularly given that the Commission’s discussion of the de
minimis threshold earlier in the Adopting Release hardly encompasses more than one page
collectively. The Court declines to attribute the significance to this omission that Plaintiffs
invite. But more to the point, whatever potential impact this single factor might merit, it does not
outweigh the more consequential evidence in the record that the Court has already discussed.

33
Of course, the Court “defer[s] to the administering agency’s interpretation as long as it reflects a

permissible construction of the statute.” Friends of Blackwater v. Salazar, 691 F.3d 428, 432

(D.C. Cir. 2012) (quoting Sherley v. Sebelius, 644 F.3d 388, 393 (D.C. Cir. 2011)). And the

Court has no trouble concluding that the SEC’s interpretation—that it possessed discretion to

determine whether a de minimis exception was appropriate—was permissible. Indeed, this is the

very interpretation Plaintiffs themselves champion. (See Pls.’ Reply at 11) (“The Commission

plainly had power to adopt a de minimis exception.”). As a result, the Commission’s reading of

Section 1502, at least as it pertains to the de minimis exception, survives the Chevron gauntlet.

But this is still not the end of the matter, because not only do Plaintiffs challenge the

Commission’s interpretative approach, they also take issue with the SEC’s application of its

interpretation. Stated another way, Plaintiffs argue that even if the Commission exercised

discretion in not adopting a de minimis exception, its decision was still irrational and arbitrary. 17

In particular, Plaintiffs complain that the SEC relied too heavily on the State Department’s

assessment, and also that the Commission failed to analyze the various de minimis thresholds

proposed by commentators during the rulemaking process. On balance, while the Court agrees

that the SEC’s explanation arguably could have been more thorough in some respects, the Court

cannot say that the Commission’s determination was unreasonable or devoid of a “rational

connection” in violation of the APA.

17
The Court is cognizant that sometimes “an arbitrary and capricious claim and a Chevron
step two argument overlap,” see, e.g., Gen. Instrument Corp. v. FCC, 213 F.3d 724, 732 (D.C.
Cir. 2000), but the Court views the two concepts as analytically distinct on this particular point,
see Cont’l Air Lines, 843 F.2d at 1452 (“[I]nterpreting a statute is quite a different enterprise than
policymaking.”). Plaintiffs do not claim that the statute was “unreasonably interpreted,” Gen.
Instrument, 213 F.3d at 732, rather they argue that the Commission’s interpretation was
unreasonably applied.
34
 Based on the SEC’s review of the information gathered during the rulemaking process, it

concluded that adopting a de minimis exception would undermine the impact of the Final Rule.

See 77 Fed. Reg. at 56,298 (“[W]e believe the purpose of the Conflict Minerals Statutory

Provision would not be properly implemented if we included a de minimis exception.”). In

reaching this conclusion, the Commission weighed and evaluated feedback from commentators

and stakeholders on both sides of the issue. Many commentators opposed the implementation of

a de minimis exception, while others advocated in its favor and proposed a number of potential

options. See id. at 56,295 & nn.213-223. Ultimately, the SEC thought that because conflict

minerals “are often used in products in very limited quantities . . . [,] including a de minimis

threshold could have a significant impact on the final rule.” Id. at 56,298. As the Commission

points out, this determination is supported by the record, including in comments proffered by the

State Department, by the members of legislative branch, and by some industry stakeholders. See

id. at 56,295 n.213; (See, e.g., JA445 (U.S. Dep’t of State Responses to Request for Comment)

(“In light of the nature in which the covered minerals are often used in products, i.e. often in very

limited quantities, such a change could have a significant impact on the proposed regulations. A

de minimis threshold should not be considered under current circumstances.”); JA103 (statement

of Sen. Durbin and Rep. McDermott) (“[T]he weight of the conflict minerals so essential to

many products is very small, and the percentage by weight or dollar value of the conflict

minerals as a proportion of unit cost is often also very small.”); JA602 (statement of Andrew

Matheson, Boston Silicon Materials, LLC) (noting that although a “computer logic chip contains

perhaps a few milligrams of tantalum,” the “semiconductor industry as a whole consumes over

100 tons of tantalum metal annually,” such that a proposal would “exempt (for example) all

computer logic chips”)). Moreover, the Commission also believed that the Rule’s focus on

35
whether the minerals are “necessary to the functionality or production” of a particular product,

along with the Rule’s limited application to minerals that are “intentionally added,” would

mitigate some of the de minimis concerns identified by commentators. 77 Fed. Reg. at 56,298.

In the Court’s view, therefore, the Adopting Release—and the administrative record more

broadly—establish that the SEC’s de minimis determination was rationally based upon the

evidence before it. While it may be true that the adoption of some type of de minimis approach

could also have been a reasonable, alternative option, this does not render the SEC’s contrary

determination arbitrary or unreasonable.

The Court is similarly unpersuaded by Plaintiffs’ argument that the Commission erred in

failing to “analyze the many de minimis thresholds that commentators proposed.” (Pls.’ Brief at

37). While a regulation can be arbitrary and capricious if the agency “failed to address

significant comments raised during the rulemaking,” it is equally true that the “agency’s

obligation to respond . . . is not ‘particularly demanding.’” Ass’n of Private Sector Colls. &

Univs. v. Duncan, 681 F.3d 427, 441-42 (D.C. Cir. 2012). Indeed, the D.C. Circuit has made

clear that “[w]hile an agency must consider and explain its rejection of reasonably obvious

alternatives, it need not consider every alternative proposed nor respond to every comment

made.” Nat’l Shooting Sports Found. v. Jones, 716 F.3d 200, 215 (D.C. Cir. 2013). Rather,

“[t]he failure to respond to comments is significant only insofar as it demonstrates that the

agency’s decision was not based on a consideration of the relevant factors.” Covad Commc’ns

Co. v. FCC, 450 F.3d 528, 550 (D.C. Cir. 2006). Applying these standards, the SEC was not

required to exhaustively analyze each and every proposal it received during the rulemaking

process. Instead, given its “broader conclusion” that conflict minerals are often used in minute

amounts, the SEC believed that any type of categorical de minimis exception had the potential to

36
swallow the rule and would be inappropriate. This analysis was sufficient to satisfy the

Commission’s obligations under the APA.

In sum, the Commission’s choice not to include a de minimis exception in the Final Rule

was the product of reasoned decision-making, and the Court finds no basis under the APA to

subjugate the Commission’s prerogative on this point.

5. The Final Rule’s Reasonable Country of Origin Inquiry

Plaintiffs next contest the propriety of the “reasonable country of origin inquiry” adopted

as part of the Commission’s Final Rule. More specifically, Plaintiffs complain that “the SEC’s

extremely broad standard, requiring due diligence and reports not only when there is ‘reason to

believe’ that the minerals ‘did originate’ in the region, but also whenever there is ‘reason to

believe’ that the minerals ‘may have originated’ in the region, is inconsistent with the statute.”

(Pls.’ Reply at 20) (emphasis in original). 18 On this claim, Plaintiffs first contend that the statute

clearly compels their interpretation, which would limit the Rule’s due diligence and reporting

requirements to issuers with minerals that actually “did originate” in or around the DRC.

Second, Plaintiffs argue that even if the statute were ambiguous, the SEC’s interpretation merits

no deference because it “wrongly believed its interpretation [was] compelled by Congress.”

(Pls.’ Brief at 42). Finally, while Plaintiffs dispute that the Commission exercised any

discretion, they challenge its claimed exercise of judgment and its resultant interpretation of

Section 1502 as arbitrary and capricious.

18
Originally, Plaintiffs also challenged what they believed to be the scope of the SEC’s
“reasonable country of origin inquiry,” insofar as it would have required issuers to trace their
minerals all the way back to a smelter. (See Pls.’ Brief at 43-46). As the briefing progressed,
however, and as the SEC further explained the Rule’s application, Plaintiffs jettisoned this claim,
(see Pls.’ Reply at 20-21), and it was not raised during the hearing. Consequently, the Court
deems this argument abandoned and finds that it merits no further discussion.

37
 As an initial matter, the Court disagrees that the statutory language clearly resolves this

question. True, the text of Section 1502 does require companies to disclose “whether” their

necessary conflict minerals “did originate” in the Covered Countries. See 15 U.S.C. §

78m(p)(1). But this is far from an unambiguous Congressional directive, as Plaintiffs suggest.

Rather, as the Commission observes, the statute is silent as to how companies go about

determining “whether” their minerals “did originate” in the Covered Countries in the first place.

Furthermore, the Commission rightly argues that “the statute is silent with respect to the

disclosure obligations of issuers who, following [their] inquiry, do not know ‘whether’ those

minerals ‘did originate’ in the Covered Countries.” (Def.’s Brief at 56). The SEC, exercising its

interpretive authority, sought to gap-fill this silence through the “reasonable country of origin

inquiry” it created. Contrary to Plaintiffs’ arguments, this approach is not “inconsistent with the

statutory text.” (Pls.’ Reply at 20). 19 Rather, the Court concludes that Congress did not directly

speak to the precise circumstances triggering disclosure obligations (and, by implication, due

diligence and reporting requirements) in enacting Section 1502.

The Court also rejects Plaintiffs’ contention that Chevron deference is inappropriate

because the SEC believed its interpretation was compelled by Congress. To support their

argument, Plaintiffs rely upon the SEC’s statement in the Adopting Release that “requiring

further steps by issuers that have reason to believe that they have necessary conflict minerals that

19
Relatedly, while Plaintiffs insist that Congress clearly limited the Rule’s scope to
minerals that “did originate” in the Covered Countries—choosing not to require reporting for
minerals that “may have originated” in the Covered Countries—the legislative record suggests
otherwise. See 156 Cong. Rec. 3976 (May 19, 2010) (statement of Sen. Feingold) (“[The
amendment] will require those companies to make public and disclose annually to the Securities
and Exchange Commission if the minerals in their products originated or may have originated in
Congo or a neighboring country.”) (emphasis added). While the Court would not—and does
not—accord the floor statement of a single Senator dispositive weight one way or the other, the
legislative history at least raises some question on this point.
38
may have originated in the Covered Countries is necessary to carry out the requirements

contemplated by the statute.” (Pls.’ Brief at 41) (quoting 77 Fed. Reg. at 56,314). But again,

this statement simply demonstrates that the Commission looked, at least in part, to the statute’s

purpose in crafting its own interpretation, which is entirely appropriate. Vill. of Barrington, 636

F.3d at 665-66; Northpoint Tech., 412 F.3d at 151. This language does not, by contrast, indicate

that the Commission felt its interpretation was “compelled by Congress,” Peter Pan, 471 F.3d at

1354, or that it was “without discretion to reach another result,” State of Ariz., 281 F.3d at 253-

54. To be sure, the Adopting Release is replete with remarks indicating precisely the opposite—

that the Commission exercised its discretion in shaping this aspect of the Rule. See 77 Fed. Reg.

at 56,313 (“We believe the [Final Rule’s] approach . . . is most consistent with the statutory

language and its purposes.”) (emphasis added); id. at 56,314 (“This approach strikes a more

appropriate balance.”) (emphasis added); id. (“Alternatively, the Conflict Minerals Statutory

Provision could be interpreted to require all issuers to determine whether their conflict minerals

originated in the Covered Countries.”) (emphasis added). Thus, having confirmed that the

statute is ambiguous and that the SEC appropriately construed it as such, the Court proceeds to

Plaintiffs’ final argument—that the SEC falters at Chevron Step Two.

To repeat, the Court must defer to the Commission’s interpretation “so long as it reflects

a permissible construction of the statute,” Friends of Blackwater, 691 F.3d at 432; see also

Menkes v. Dep’t of Homeland Sec., 637 F.3d 319, 333 (D.C. Cir. 2011), and is “not otherwise

arbitrary, capricious, or manifestly contrary to the statute,” Motion Picture Ass’n of Am. v. FCC,

309 F.3d 796, 801 (D.C. Cir. 2002). The SEC’s “reasonable country of origin inquiry” survives

this deferential standard of review. Through the Final Rule, the Commission thought it

appropriate to segregate issuers’ obligations—both to trace their supply chains and to disclose

39
the results of those efforts to the SEC—into several steps, beginning with the “reasonable

country of origin inquiry.” From there, under the Commission’s interpretation of Section 1502,

issuers who have no reason to believe that their minerals may have originated in the Covered

Counties (or who reasonably believe their minerals came from recycled or scrap sources) need

not conduct any further due diligence efforts, nor must they file a Conflict Minerals Report. And

even for issuers that must conduct due diligence under the Rule, only issuers that confirm their

minerals originated in the Covered Countries, or that cannot ultimately determine the source of

their minerals, must file a Conflict Minerals Report. 77 Fed. Reg. at 56,313. In the

Commission’s view, this interpretation of Section 1502 struck the most “appropriate balance” in

achieving the statute’s objectives without imposing unnecessarily excessive costs on covered

issuers. Id. at 56,314. 20

Notably, the Commission also recognized alternative interpretations it believed would

have been permissible under the statute. On the one hand, the Commission noted that Section

1502 could be interpreted to require due diligence efforts only from issuers that affirmatively

determine that their minerals originated in the Covered Countries. In the SEC’s view, however,

this interpretation had the potential to encourage willful blindness by issuers and could have

created an incentive for issuers to avoid learning the true source of their minerals. Id. On the

other side of the spectrum, the Commission observed that the statute could be interpreted to

require all covered issuers to undertake due diligence efforts to determine the source of their

minerals, regardless of whether issuers had any reason to believe that their minerals may have

20
Further, as noted earlier, the Commission’s “reasonable country of origin approach” is
modeled after and consistent with the “red flag” framework that triggers due diligence
obligations under OECD guidance. See 77 Fed. Reg. at 56,312. The SEC’s general adherence to
“the only nationally or internationally recognized due diligence framework available,” id. at
56,281, renders its interpretation all the more reasonable and permissible.
40
originated in the Covered Countries. Id. On balance, the Commission concluded that the most

reasonable approach was to require due diligence efforts by issuers that know their conflict

minerals originated, or that have “reason to believe” their minerals “may have originated,” in the

Covered Countries. Id. at 56,312-56,314. Again, while Section 1502 of Dodd-Frank requires

companies to disclose “whether” their minerals “did originate” in the Covered Countries, the

statute provides no further detail as to how companies reach this underlying determination in the

first place. According to the SEC, “the reasonable country of origin inquiry” offers a clear way

for issuers to make this determination in a manner that “reduces the burdens” and is “cost-

effective.” Id. at 56,314. The Commission’s approach to this issue surely constitutes a

reasonable and permissible interpretation of Section 1502.

One final point bears mentioning. Plaintiffs lean heavily on the Commission’s use of the

phrase “may have originated” in arguing that the SEC’s interpretation stretches the statute

beyond its bounds. From Plaintiffs’ viewpoint, the Rule could have properly been written to

require due diligence and reporting from issuers that have “reason to believe” their minerals “did

originate” in the Covered Countries, but the Commission’s imposition of those obligations on

issuers that have “reason to believe” their minerals “may have originated” in the Covered

Countries is, according to Plaintiffs, simply a step too far. (See Pls.’ Reply at 20). The Court

does not agree. Indeed, the Court is hard-pressed to conjure up a scenario in which an issuer,

following its reasonable country of origin inquiry, would have reason to believe that its minerals

“may have originated” in the Covered Countries, but would not have reason to believe that its

41
minerals “did originate” in the Covered Countries. 21 Insofar as there is any discernible

difference between these two articulations, it strikes the Court as a semantic one.

In sum, therefore, the Court concludes that the Commission’s adoption of the reasonable

country of origin inquiry is based on a reasonable and permissible construction of Section 1502,

and is not otherwise arbitrary or capricious in contravention of the APA.

6. The Rule’s Coverage Of Issuers That “Contract to Manufacture” Products

Next, Plaintiffs argue that the Commission’s extension of the Final Rule to issuers that

only “contract to manufacture” products with necessary conflict minerals, rather than limiting the

Rule’s coverage to issues that themselves “manufacture” such products, was contrary to law and

arbitrary and capricious. More specifically, Plaintiffs insist that the Commission’s interpretation

fails at Chevron Step One because the statute plainly limits its application to “manufacturing”

issuers. Plaintiffs also argue that because “the SEC erroneously felt itself bound to adopt the

contrary conclusion, the SEC’s interpretation is entitled to no deference.” (Pls.’ Brief at 49). For

its part, the Commission counters that it properly construed Section 1502 as ambiguous as to

whether issuers that “contract to manufacture” should be covered by its Rule, and in its view, the

SEC reasonably and appropriately answered that question in the affirmative.

21
Plaintiffs’ counsel attempted to paint an example of such a hypothetical situation during
oral argument. As Plaintiffs’ scenario went, if an issuer traced its minerals to a smelter that, over
the course of the previous five years, had sourced approximately 55% of its minerals from
Covered Countries, then in that case, the issuer would have reason to believe that its particular
minerals “did originate” in the Covered Countries. By contrast, if the same smelter informed the
issuer that over the course of the previous five years, it sourced only 5% of its minerals from
Covered Countries, Plaintiffs posited that the issuer would not have reason to believe that its
minerals “did originate” in the Covered Countries, but that it would have reason to believe that
its minerals “may have originated” in the Covered Countries. As the Commission responded,
however, in the latter scenario, one could still credibly and reasonably argue that the issuer had
reason to believe its minerals “did originate” in the Covered Countries. The Court agrees and
finds that even under Plaintiffs’ hypothetical, the two competing articulations effectively amount
to a distinction without a difference.
42
 To start with, the Court gleans no clear and plain meaning from the statute. In pressing

their interpretation, Plaintiffs rely upon the “plain text” of the statute, emphasizing that Congress

limited its definition of “person” covered by the conflict minerals disclosures to issuers using

necessary conflict minerals in “a product manufactured by such person.” See 15 U.S.C. §

78m(p)(2)(B). From there, Plaintiffs contrast § 78m(p)(2)(B) with § 78m(p)(1)(A), wherein

Congress directed covered issuers to submit a report describing products “manufactured or

contracted to be manufactured that are not DRC conflict free,” insisting that Congress’s use of

“different terms . . . generally implies that different meanings were intended.” See United States

v. Bean, 537 U.S. 71, 76 n.4 (2002). If Congress wanted the statute to also cover entities that

only “contract to manufacture products” containing necessary conflict minerals, Plaintiffs argue,

Congress knew how to say so. But the Commission rejoins that Congress’s failure to expressly

include issuers that “contract to manufacture” in the definition of “person” under § 78m(p)(2)(B)

should not be read as a prohibition on the SEC’s interpretation, but simply as an indication that

Congress decided “not to mandate any solution” and “to leave the question to agency discretion.”

See Catawba County v. EPA, 571 F.3d 20, 36 (D.C. Cir. 2009) (“[T]hat Congress spoke in one

place but remained silent in another, as it did here, rarely if ever suffices for the direct answer

that Chevron step one requires.”). In addition, Plaintiffs’ interpretation does not satisfactorily

explain why Congress required products “contracted to be manufactured,” 15 U.S.C. §

78m(p)(1)(A)(ii), to be included in the Conflict Minerals Report. The fact that both sides

credibly wield competing canons of statutory interpretation suggests that Congress did not

plainly answer this particular question in enacting Section 1502.

Nor is the statute’s legislative history any more conclusive. Plaintiffs point out that an

earlier version of the bill would have covered an issuer if necessary conflict minerals were

43
included in “a product of such person,” 156 Cong. Rec. S3103 (May 4, 2013) (amendment by

Sen. Brownback), while the final version of the bill was amended to only apply to an issuer if

necessary conflict minerals were included in “a product manufactured by such person, 156 Cong.

Rec. 3866 (May 18, 2010) (amendment by Sen. Brownback) (emphasis added). As Plaintiffs

interpret this development, the legislative history demonstrates that Congress intended to limit

the statute to manufacturers. (Pls.’ Brief at 47). The SEC reads things differently, insisting that

this amendment is equally consistent with its own reading of the statute, insofar as Congress

sought to exclude pure retailers from the Rule’s coverage, while still capturing issuers that have

some role in the manufacturing of their products. (Def.’s Brief at 54 n.10). On balance, either

takeaway is plausible.

Most fundamentally, however, the statute’s ambiguity stems from the ambiguity inherent

in the term “manufacture” itself. Indeed, our Circuit has expressly characterized the word

“manufacture” as “an inherently ambiguous term,” noting that “[f]ew if any authorities define

manufacturing as limited solely to fabrication.” United States v. W. Elec. Co., 894 F.2d 1387,

1390-91 (D.C. Cir. 1990) (“We do not find design and development contrary to the ‘plain

meaning’ of the word ‘manufacture.’”); see also Charles Peckat Mfg. Co. v. Jarecki, 196 F.2d

849, 851 (7th Cir.), cert. denied, 344 U.S. 875 (1952) (finding a patent holder that contracted

with an independent fabricator to be a “manufacturer” for purposes of an excise tax). Thus, even

if the Court were to agree with Plaintiffs’ contention that the statute plainly “applies only to

manufacturers,” (Pls.’ Brief at 46), this would not be the end of the matter because, under our

Circuit’s precedent, that term is inherently ambiguous and might well include entities that

contract out the manufacture of products with necessary conflict minerals. Consequently, the

44
Court simply cannot say that Congress directly, let alone clearly, spoke to this issue, which

means that Plaintiffs cannot prevail under Chevron Step One. 22

The Court next turns to what should be a familiar argument at this point—Plaintiffs’

contention that the Commission wrongly believed its interpretation compelled by Congress. And

despite the old adage, it seems the third time is not a charm here. In advancing this argument,

Plaintiffs point to the following statement by the SEC in the Adopting Release: “[W]e believe

the statutory intent to include issuers that contract to manufacture their products is clear based on

the statutory obligation for issuers to describe in their Conflict Minerals Report products that are

manufactured and contracted to be manufactured.” (Pls.’ Reply at 17) (quoting 77 Fed. Reg. at

56,291). Plaintiffs also highlight the SEC’s remark that its approach “is based on [its]

interpretation of the statute in light of [its] understanding of the statutory intent and a reading of

the statute’s text.” (Id. at 17-18) (quoting 77 Fed. Reg. at 56,345). But these statements do not

reveal that the Commission felt compelled to adopt the approach that it did; rather, they indicate

that the SEC sought to exercise its judgment in a manner consistent with the statute’s underlying

purpose. Moreover, while Plaintiffs seem to seize upon the Commission’s use of the word

“clear” in describing its understanding of statutory intent, our Circuit has squarely rejected this

angle before. See Ass’n of Private Sector Colls. & Univs., 681 F.3d at 445 (“[I]t would be a

stretch, to say the least, to hold that the Department’s use of the word ‘clear’ demonstrates that

22
The Court also finds it notable that, during the rulemaking process, several of the
Plaintiffs in this case appeared to agree with the Final Rule’s inclusion of issuers that “contract to
manufacture” products. (See JA273 (letter from Business Roundtable) (“[T]he Provision should
apply to both issuers that manufacture their own products and issuers who contract to
manufacture . . .”); JA383 (letter from NAM) (“The rules should apply to issuers that contract to
manufacture products only if the issuer directly specifies the conflict minerals as an ingredient,
feature, or component of the product or process.”). Potential waiver issues aside, Plaintiffs’
contrary positions during the notice-and-comment period strongly suggest that, at a minimum,
the statute is silent or ambiguous on this particular point.
45
the agency meant to suggest that its regulatory interpretation was ‘compelled by Congress.’”).

The Court thus concludes that the SEC exercised its judgment in resolving this question, and

forges ahead to Chevron Step Two.

On this last point, Plaintiffs argue, in summary fashion, that “the SEC’s interpretation

would be arbitrary and capricious even if the statute were ambiguous and the agency had

exercised discretion.” (Pls.’ Reply at 19). More specifically, Plaintiffs assert that the

Commission erred in failing to determine that its extension of the Rule to issuers that “contract to

manufacture” would “yield any benefits.” (Id.). As best as the Court can tell, Plaintiffs are

essentially reprising their earlier argument regarding the SEC’s failure to independently confirm

that the Final Rule would achieve the humanitarian benefits identified by Congress, and the

Court rejects that argument for the reasons already stated. Otherwise, the Court is convinced that

the Rule’s application to issuers that “contract to manufacture” is an amply reasonable

construction of Section 1502. This is particularly true given the guidance supplied by the SEC in

the Adopting Release, wherein the Commission emphasized its focus on the degree of influence

and control that an issuer exercises over the manufacturing process, effectively excluding “pure

retailers” from the scope of the Rule. See 77 Fed. Reg. at 56,291. 23

The Court thus concludes that the SEC’s application of the Conflict Minerals Rule to

issuers that “contract to manufacture” products is a perfectly permissible construction of Section

1502, and is not otherwise arbitrary, capricious, or contrary to law.

23
For these same reasons, Plaintiffs’ concerns that the Rule will require many non-
manufacturers to create “supply-chain monitoring processes and mechanisms . . . from scratch,”
(Pls.’ Brief at 49), largely miss the mark.
46
 7. The Commission’s Adoption Of Different Phase-In Periods

As a final APA challenge to the Conflict Minerals Rule, Plaintiffs argue that the

Commission’s decision to adopt a four-year phase-in period for small companies, while only

allowing for a two-year phase-in period for large companies, is arbitrary and capricious. On this

point, Plaintiffs begin with the assertion that “many smaller companies are part of larger

companies’ supply chains.” (Pls.’ Brief at 50) (quoting 77 Fed. Reg. at 56,361). In turn, they

fault the Commission’s use of a shorter phase-in period for smaller companies because “[i]f

small companies cannot comply with the rule for four years, and large companies will have to

rely on small companies to comply,” then it is unreasonable to expect larger companies to be

able to comply within two years. (Id.). The Commission maintains otherwise. As explained by

the SEC, its decision to grant smaller companies a longer transition period stemmed from the

Commission’s belief that such “issuers may lack the leverage to obtain detailed information

regarding the source of a particular conflict mineral.” 77 Fed. Reg. at 56,323. Despite Plaintiffs’

protestations, the Court cannot conclude that this determination was unreasonable.

It is undoubtedly true, as Plaintiffs assert, that some large issuers rely upon smaller

issuers covered by the Rule as part of their supply chains. In those circumstances, the disparate

transition periods may pose some unique difficulties that might not otherwise exist. But

Plaintiffs’ concerns also seem overinflated to a large extent. To be clear, the temporary

transition period does not excuse issuers from complying with the Final Rule altogether—it

simply allows issuers that are ultimately unable to determine the source of their minerals to

identify their products as “DRC conflict undeterminable,” rather than as having “not been found

to be ‘DRC conflict free.’” See id. at 56,320-56,324. All covered issuers, large and small, must

still undertake a reasonable country of origin inquiry and, if necessary, the ensuing due diligence

efforts required by the Rule. So even smaller issuers will be sourcing their minerals and tracing
47
their supply chains during the transition periods, and larger issuers can still rely upon

information gleaned from those efforts in connection with their own compliance practices.

Simply put, while the Court does not necessarily disagree with Plaintiffs that it might have been

equally reasonable for the SEC to adopt a uniform transition period for all covered issuers, this

does not mean that it was unreasonable for the SEC to bifurcate the phase-in period, and the

Court declines to substitute its judgment on this question for the Commission’s. 24

B. Plaintiffs’ First Amendment Challenge

Along with their claims under the APA, Plaintiffs also mount a separate constitutional

challenge, arguing that the disclosure requirements under the Final Rule and Dodd-Frank § 1502

improperly compel “burdensome and stigmatizing speech” in violation of the First Amendment.

(See Pls.’ Brief at 51-55). As articulated in their briefing, Plaintiffs argued that the Rule and the

underlying statute infringe upon the First Amendment “by compelling companies to publicly

state on their own websites, as well as in SEC filings, that certain of their products are ‘not DRC

conflict free.’” (Id. at 51-52). In other words, Plaintiffs appeared, at first, to be challenging as

unconstitutional both the disclosures to be filed with the Commission, and the requirement that

companies make those disclosures publicly available on their own websites. During oral

argument, however, Plaintiffs’ counsel confirmed that the relief they seek is limited to the latter

issue—the provisions of Section 1502 and the Final Rule that obligate companies to post conflict

minerals disclosures on their own websites. In turn, the Court confines its analysis accordingly

and does not reach the question of whether the statutory and regulatory provisions requiring

24
In crafting this distinction, the SEC also summarized one commentator’s belief that
“although smaller reporting companies may lack leverage, this disadvantage may be reduced
through the influence exerted over their suppliers by larger issuers that use the same supplier
base and that have more leverage to request such information.” 77 Fed. Reg. at 56,323 n.570.
While concededly not a perfect fit in every circumstance, the Court can certainly see the trickle-
down logic underlying the Commission’s approach.
48
disclosure of conflict minerals information to the SEC, and solely to the SEC—whether through

a Form SD or a Conflict Minerals Report—run afoul of the First Amendment.

1. Notice of Plaintiffs’ Constitutional Challenge to the United States

Before the Court can turn to the merits of Plaintiffs’ constitutional claim, a threshold

procedural issue requires attention. Pursuant to Title 28 of the United States Code:

In any action, suit or proceeding in a court of the United States to which the
United States or any agency, officer or employee thereof is not a party, wherein
the constitutionality of any Act of Congress affecting the public interest is drawn
in question, the court shall certify such fact to the Attorney General, and shall
permit the United States to intervene . . . on the question of constitutionality.

28 U.S.C. § 2403(a). Federal Rule of Civil Procedure 5.1, in turn, implements the provisions of

§ 2403(a), requiring any party “drawing into question the constitutionality of a federal . . .

statute,” as Plaintiffs do here, to promptly “file a notice of constitutional question” with the Clerk

of Court and to “serve the notice and paper on the Attorney General of the United States.” FED.

R. CIV. P. 5.1(a). Thereafter, the United States, through the Attorney General, is afforded sixty

days to intervene in the action to defend the constitutionality of the challenged statute. See id.

5.1(c). “Th[is] certification requirement protects the public interest by ensuring that the

Executive Branch can make its views on the constitutionality of federal statutes heard.” Okla. ex

rel. Edmondson v. Pope, 516 F.3d 1214, 1216 (10th Cir. 2008) (citing 7C CHARLES ALAN

WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1915

(2d ed. 1986)). While not addressed in either side’s briefing, the Court independently raised this

subject with the parties at the hearing.

As an initial matter, while the SEC is a defendant in this action and can legitimately be

characterized as an “agency” of the United States for certain purposes, neither Plaintiffs nor the

Commission contends that the SEC’s presence in this lawsuit dispenses with these notice

49
requirements to the United States. And even if this were not true, the Court would be reluctant to

so find, given that the SEC is an independent agency that is represented in this litigation by the

Commission’s own lawyers, and not by the U.S. Department of Justice. See SEC v. Fed. Labor

Relations Auth., 568 F.3d 990, 997-98 (D.C. Cir. 2009) (Kavanaugh, J., concurring) (explaining

that the Attorney General does not have dispositive legal control over independent agencies). As

a result, the Court holds that Plaintiffs were obligated to provide notice under 28 U.S.C. §

2403(a) and Federal Rule 5.1. Cf. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., ---

U.S. ---, 130 S. Ct. 3138, 3147-49 (2010) (noting the Attorney General’s intervention to defend

the constitutionality of the Sarbanes-Oxley Act of 2002, even though the Public Company

Accounting Oversight Board, whose members were appointed by the SEC and were “Officers of

the United States,” was a defendant in the action and was represented by counsel). During the

hearing, Plaintiffs suggested that they have satisfied these notice requirements by serving a copy

of their Amended Petition for Review (filed with the Court of Appeals) on the United States

Attorney General. While true, that petition did not expressly indicate that Plaintiffs were

challenging the constitutionality of 15 U.S.C. § 78m(p) and therefore cannot satisfy the

requirements of 28 U.S.C. § 2403(a) and Federal Rule 5.1. (See D.C. Circuit, No. 12-1422, Am.

Pet. for Review (filed Oct. 22, 2012)). 25 And while Plaintiffs later articulated the constitutional

claim more distinctly in their Statement of Issues and in other filings, there is nothing on the

Court of Appeals’ docket (nor on this Court’s docket) to indicate that any subsequent

25
Nor would this step have complied with Federal Rule of Appellate Procedure 44(a),
which requires that a party challenging the constitutionality of a federal statute to “give written
notice to the circuit clerk immediately upon the filing of the record or as soon as the question is
raised in the court of appeals,” and that the clerk “then certify that fact to the Attorney General.”
FED. R. APP. P. 44(a); see also Baker v. GTE North, Inc., 110 F.3d 28, 30 (7th Cir. 1997) (“This
[requirement] means something more than just making an argument in the brief; otherwise Rule
44 would be superfluous.”).
50
submissions were ever served upon the Attorney General. Nor does the Court find that the

SEC’s reported “consultation” with the Department of Justice during this litigation accomplished

or dispensed with the mandatory notice to be served upon the Attorney General.

That being said, the failure to provide notice under 28 U.S.C. § 2403(a) and Federal Rule

5.1 does not deprive the Court of jurisdiction to hear the case. See Tonya K. v. Bd. of Educ., 847

F.2d 1243, 1247 (7th Cir. 1988); Ga. Ass’n of Retarded Citizens v. McDaniel, 855 F.2d 805, 810

n.3 (11th Cir. 1988). And Federal Rule 5.1 does not specify when certification must be made to

the Attorney General, other than “before a final judgment holding the statute unconstitutional.”

FED. R. CIV. P. 5.1(c). Thus, the Court “may reject a constitutional challenge to a statute at any

time.” FED. R. CIV. P. 5.1(c) advisory committee’s note (2006); see also 1 JAMES WM. MOORE,

ET AL., MOORE’S FEDERAL PRACTICE ¶ 5.1.06[2] (3d ed. 2013) (explaining that a court may enter

“final judgment or an order rejecting the constitutional challenge to the statute” without awaiting

the Attorney General’s intervention determination under Federal Rule 5.1). Insofar as the Court

rejects Plaintiffs’ First Amendment challenge for the reasons that follow, the Court will certify a

copy of this Opinion and the accompanying Order to the Attorney General, thereby satisfying the

notice requirements of 28 U.S.C. § 2403(a) and Federal Rule 5.1. FED. R. CIV. P. 5.1(b), (c); see

also Ga. Ass’n, 855 F.2d at 810 n.3; Buchanan Cnty. v. Blankenship, 545 F. Supp. 2d 553, 555

n.3 (W.D. Va. 2008); Rhinebarger v. Orr, 657 F. Supp. 1113, 1115 n.1 (S.D. Ind. 1987). The

Court will entertain a motion for reconsideration filed by the United States if the Attorney

General determines that intervention is still necessary.

51
 2. Applicable Standard of Review

At the outset, it is well settled that the “[t]he First Amendment protects against

government infringement on ‘the right to speak freely and the right to refrain from speaking at

all.’” United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1142 (D.C. Cir. 2009) (per

curiam) (quoting Wooley v. Maynard, 430 U.S. 705, 714 (1977)). In other words, the fact that

the challenged disclosures compel, rather than restrict, speech is of no consequence to the

Court’s analysis; the First Amendment’s safeguards adhere just the same. See id.; see also Full

Value Advisors, LLC v. SEC, 633 F.3d 1101, 1108 (D.C. Cir. 2011). On this much, at least, the

parties agree. But from there, as is often the case in the First Amendment arena, the parties

quarrel over the appropriate standard of review governing the Court’s analysis.

Before plunging into that issue, however, the Court pauses to clearly and specifically

summarize the disclosure scheme created by Congress and the SEC through Dodd-Frank § 1502

and the Final Rule, respectively.

Under Section 1502, any covered issuer “shall make available to the public on [its]

Internet website . . . the information disclosed by such person under subparagraph (A).” 15

U.S.C. § 78m(p)(1)(E). Subparagraph (A) of the statute, in turn, requires an issuer to “disclose

annually . . . whether conflict minerals that are necessary” to the functionality or production of

its products “did originate in the [DRC] or an adjoining country.” Id. § 78m(p)(1)(A). Further,

“in cases in which such conflict minerals did originate in any such country,” the issuer must also

“submit to the Commission a report that includes”:

(i) a description of the measures taken by the person to exercise due diligence on
the source and chain of custody of such minerals, which measures shall
include an independent private sector audit of such report . . . ; and
(ii) a description of the products manufactured or contracted to be manufactured
that are not DRC conflict free . . . , the entity that conducted the independent
private sector audit . . . , the facilities used to process the conflict minerals, the

52
 country of origin of the conflict minerals, and the efforts to determine the
mine or location of origin with the greatest possible specificity.

Id. § 78m(p)(1)(A)(i)–(ii). These are the disclosures Congress mandated by statute.

The Final Rule’s provisions mirror these requirements. Depending on the results of its

reasonable country of origin inquiry, an issuer must: (a) file a Form SD with the Commission,

“briefly describ[ing] the reasonable country of origin inquiry it undertook in making its

determination [as to the origin of its minerals] and the results of the inquiry it performed,” and

“must disclose this information on its publicly available Internet Web site”; and/or (b) “file a

Conflict Minerals Report as an exhibit to its [Form SD] and provide that report on its publicly

available Internet Web site.” 77 Fed. Reg. at 56,362-56,363. The Conflict Minerals Report, if

required, must include “[a] description of the measures the registrant has taken to exercise due

diligence on the source and chain of custody of [its] conflict minerals,” as well as a description

of the issuer’s products “that have not been found to be ‘DRC conflict free,’ . . . the facilities

used to process the necessary conflict minerals in those products, the country of origin of the

necessary conflict minerals in those products, and the efforts to determine the mine or location of

origin with the greatest possible specificity.” Id. at 56,363-56,364.

Simply stated, both the statute and the Rule require issuers to submit disclosures and

reports to the Commission regarding their conflict minerals sourcing practices, and to thereafter

disclose such reports—whether in the form of a Form SD or a Conflict Minerals Report—on

their own public websites.

With this background in mind, the Court turns to the appropriate standard of review. To

begin with, Plaintiffs’ challenge to the provisions requiring issuers to publicly disclose

information on their own websites—the thrust of their claim here—calls for a different

constitutional analysis than would a challenge to those aspects of Section 1502 and the Final

53
Rule that merely call for disclosures to the Commission. The disclosures that must be made to

the SEC, standing alone, would be subject to a more relaxed level of scrutiny, particularly given

that the disclosures are quite arguably made in the realm of securities regulation. See, e.g., Full

Value Advisors, 633 F.3d at 1108-09 (applying rational basis review to compelled disclosures “to

the Commission alone”); SEC v. Wall St. Publ’g Inst., Inc., 851 F.2d 365, 373 (D.C. Cir. 1988)

(“[T]he exchange of information regarding securities is subject only to limited First Amendment

scrutiny.”); see also Pharm. Care Mgmt. Ass’n v. Rowe, 429 F.3d 294, 316 (1st Cir. 2005)

(applying rational basis test to “routine disclosure of economically significant information

designed to forward ordinary regulatory purposes”). But Plaintiffs’ challenge is not so framed.

Rather, they seek to invalidate those aspects of Section 1502 and the Final Rule that mandate

public disclosure of this information on company websites. And in the Court’s view, these

disclosures trigger a more stringent constitutional analysis.

The SEC urges the Court to apply the “rational basis” standard derived from the Supreme

Court’s decision in Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471

U.S. 626 (1985). Under the Zauderer standard, “‘purely factual and uncontroversial’ disclosures

are permissible if they are ‘reasonably related to the State’s interest in preventing deception of

consumers,’ provided the requirements are not ‘unjustified or unduly burdensome.’” R.J.

Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1212 (D.C. Cir. 2012) (quoting Zauderer, 471

U.S. at 651). But Commission counsel conceded at oral argument that the disclosures are not

aimed at preventing misleading or deceptive speech—a concession that, under this Circuit’s

precedent, removes this case from the Zauderer framework. Id. at 1214 (explaining that

Zauderer is limited to cases in which “the government shows that, absent a warning, there is a

self-evident—or at least ‘potentially real’—danger that an advertisement will mislead

54
consumers”). Plaintiffs, on the other hand, argue that strict scrutiny governs, pursuant to which

the disclosures must be “narrowly drawn” to serve a “compelling government interest.” See,

e.g., Brown v. Entm’t Merchs. Ass’n, --- U.S. ---, 131 S. Ct. 2729, 2738 (2011). Alternatively,

Plaintiffs insist that the regulation must at least survive “intermediate scrutiny,” whereby the

government must establish that the disclosures “directly and materially advance[]” a

“substantial” government interest. See R.J. Reynolds, 696 F.3d at 1212 (citing Cent. Hudson Gas

& Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557, 566 (1980)); see also Spirit Airlines, Inc. v.

Dep’t of Transp., 687 F.3d 403, 415 (D.C. Cir. 2012).

On balance, given the commercial nature of the disclosures at issue, the Court concludes

that it must apply the Central Hudson “intermediate scrutiny” standard. While some circuits

apply strict scrutiny once the case is found to fall outside of the Zauderer standard, 26 our Circuit

has rejected this dichotomous approach, holding instead that in evaluating the constitutionality of

compelled commercial speech, any “burdens imposed . . . receive a lower level of scrutiny from

courts.” RJ Reynolds, 696 F.3d at 1217 (quoting Philip Morris, 566 F.3d at 1142-43). Thus,

after finding Zauderer inapplicable, the D.C. Circuit in RJ Reynolds applied “the intermediate

standard set forth in Central Hudson.” Id. This Court is bound to do the same. 27

26
See Disc. Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509, 554 (6th Cir.
2012) (“If a commercial-speech disclosure requirement fits within the framework of Zauderer
and its progeny, then we apply a rational-basis standard. If it does not, then we . . . apply strict
scrutiny.”) (internal citations omitted); Entm’t Software Ass’n v. Blagojevich, 469 F.3d 641, 651-
52 (7th Cir. 2006) (analyzing whether Zauderer test or strict scrutiny applied to compelled
commercial speech).
27
In pressing for strict scrutiny, Plaintiffs argue—albeit weakly and in relatively conclusory
fashion—that the disclosures are not “commercial” in nature. Plaintiffs seem to dispute the
commercial character of the disclosures because, in their view, the “statements [are] pregnant
with political judgments and connotations regarding events in foreign countries.” (Pls.’ Brief at
52). This argument is unavailing. First, commercial speech is not limited to purely economic
speech or “speech proposing a commercial transaction,” Cent. Hudson, 447 U.S. at 561-62;
rather, our Circuit has made clear that commercial speech also encompasses “material
55
 3. Application of Central Hudson Intermediate Scrutiny

Under Central Hudson’s test, a challenged regulation survives First Amendment scrutiny

so long as: (1) the asserted “government interest is substantial,” (2) the regulation “directly

advances the government interest asserted,” and (3) “the fit between the ends and the means

chosen to accomplish those ends is not necessarily perfect, but reasonable.” Spirit Airlines, 687

F.3d at 415 (quoting Cent. Hudson, 447 U.S. at 566 (1980), and Pearson v. Shalala, 164 F.3d

650, 656 (D.C. Cir. 1999)); see also R.J. Reynolds, 969 F.3d at 1212. Plaintiffs do not contest

the first of these elements. They expressly recognize that “the government’s interest in

promoting peace and security in the DRC is substantial, even compelling.” (See Pls.’ Brief at

53). In so doing, Plaintiffs rightly articulate the underlying governmental interest as the

promotion of peace and security in the DRC and its surrounding areas. See 77 Fed. Reg. at

56,275-56,276. Plaintiffs do, however, take issue with the remaining elements of Central

Hudson, which the Court addresses in turn.

In challenging the second element, Plaintiffs argue that “the statute and rule fail to

directly and materially advance” Congress’s interest in promoting peace and security in the

DRC. (Pls.’ Brief at 53). According to Plaintiffs, “[i]t is difficult to think of a less direct way to

benefit the DRC than imposing this disclosure requirement on U.S. public companies.” (Id. at

54) (emphasis in original). To satisfy this prong, the government must show that the restriction

representations about the efficacy, safety, and quality of the advertiser’s product, and other
information asserted for the purpose of persuading the public to purchase the product.” Philip
Morris, 566 F.3d at 1143 (collecting cases). Moreover, simply because a disclosure “links a
product to a current public debate,” the disclosure is “not thereby entitled to the constitutional
protection afforded noncommercial speech.” Spirit Airlines, 687 F.3d at 412 (quoting Bolger v.
Youngs Drug Prods. Corp., 463 U.S. 60, 68 (1983)). Thus, in arguing that the disclosures cannot
be deemed “commercial” simply by virtue of their relation to the “public debate” surrounding the
DRC conflict, Plaintiffs simply miss the mark. Otherwise, the Court has no trouble concluding
that the disclosures—which consist of information regarding a company’s supply chain and
sourcing practices for its products—comfortably fit within the realm of commercial speech.
56
“directly and materially advances the asserted governmental interest.” Lorillard Tobacco Co. v.

Reilly, 533 U.S. 525, 555 (2001). As Plaintiffs correctly note, this burden “is not satisfied by

mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on

commercial speech must demonstrate that the harms it recites are real and that its restriction will

in fact alleviate them to a material degree.” Rubin v. Coors Brewing Co., 514 U.S. 476, 487

(1995); see also Edenfield v. Fane, 507 U.S. 761, 770-71 (1993); RJ Reynolds, 969 F.3d at 1218-

19. The Supreme Court has also explained, however, that it does not require “empirical data . . .

[to] come accompanied by a surfeit of background information . . . . We have permitted litigants

to justify speech restrictions by reference to studies and anecdotes pertaining to different locales

altogether, or even . . . based solely on history, consensus, and simple common sense.”

Lorillard, 533 U.S. at 555; see also Fla. Bar v. Went For It, Inc., 515 U.S. 618, 628 (1995).

Further, while “‘Congress must base its conclusions upon substantial evidence’ . . . that

‘substantiality is to be measured’ by a ‘deferential’ standard . . . ‘lest [the courts] infringe on

traditional legislative authority to make predictive judgments.’” Nat’l Ass’n of Mfrs. v. Taylor,

582 F.3d 1, 15 (D.C. Cir. 2009) (quoting Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180, 195-96

(1997)).

Distilling all of these principles and applying them collectively, the Court finds that the

conflict minerals disclosure scheme surpasses the second Central Hudson hurdle, by “directly

and materially advanc[ing]” Congress’s interest in promoting peace and security in and around

the DRC. In arguing otherwise, Plaintiffs assail the disclosure scheme as lacking sufficient

empirical support on Congress’s part. But this argument is largely unavailing because it

effectively ignores the foreign relations context in which Congress enacted Section 1502. As the

Supreme Court recently made clear, “[i]n this context, conclusions must often be based on

57
informed judgment rather than concrete evidence, and that reality affects what we may

reasonably insist on from the Government.” Holder v. Humanitarian Law Project, --- U.S. ---,

130 S. Ct. 2705, 2727-28 (2010). Put another way, “because of the changeable and explosive

nature of contemporary international relations, . . . Congress . . . must of necessity paint with a

brush broader than that it customarily wields in domestic areas.” Id. (quoting Zemel v. Rusk, 381

U.S. 1, 17 (1965)). Further, while “concerns of national security and foreign relations do not

warrant abdication of the judicial role,” and while the Court does “not defer to the Government’s

reading of the First Amendment, even when such interests are at stake,” the Court must

nevertheless recognize that “when it comes to collecting evidence and drawing factual inferences

in this area, ‘the lack of competence on the part of courts is marked.’” Id. at 2727 (quoting

Rostker v. Goldberg, 453 U.S. 57, 65 (1981)). Indeed, judicial review is particularly deferential

in areas “at the intersection of national security, foreign policy, and administrative law.” Islamic

Am. Relief Agency v. Gonzales, 477 F.3d 728, 734 (D.C. Cir. 2007); see also Citizens for Peace

in Space v. City of Colo. Springs, 477 F.3d 1212, 1221-22 (10th Cir. 2007) (“Courts have

historically given special deference to other branches in matters relating to foreign affairs,

international relations, and national security.”). 28

28
In pressing their argument that Congress was required to produce more comprehensive
empirical evidence, Plaintiffs rely heavily on our Circuit’s reasoning in RJ Reynolds. Given the
distinctions between RJ Reynolds and the case at bar, however, Plaintiffs simply place too much
emphasis on its holding. Most significantly, this case concerns disclosures that implicate foreign
policy interests that, for the reasons just explained, warrant much greater deference to Congress’s
informed and predictive judgments than did the graphic cigarette warnings at issue in RJ
Reynolds. Further, the governmental interest invoked in RJ Reynolds—“reducing smoking
rates,” “discourag[ing] nonsmokers from initiating cigarette use,” and “encourag[ing] current
smokers to consider quitting,” see 696 F.3d at 1218—was far more specific than Congress’s
objective here to “promote peace and security” in the DRC. Given this, it makes less sense to
demand such particularized empirical evidence from Congress. Perhaps sensing this, Plaintiffs
sought to recast the underlying interest in their reply brief as “ameliorat[ing] the violent conflict
in the DRC,” arguing, in turn, that Congress failed to rely upon sufficient evidence that the
58
 In enacting Section 1502, Congress found that “the exploitation and trade of conflict

minerals originating in the [DRC] is helping to finance conflict characterized by extreme levels

of violence in the eastern [DRC], particularly sexual- and gender-based violence, and

contributing to an emergency humanitarian situation therein.” Dodd-Frank § 1502(a), 124 Stat.

2213. Congress believed that it could not “begin to solve the problems of eastern Congo without

addressing where the armed groups are receiving their funding, mainly from the mining of a

number of key conflict minerals.” 156 Cong. Rec. S3817 (May 17, 2010) (statement of Sen.

Durbin). In turn, Congress found that requiring disclosure from companies using these minerals

was “a reasonable step to shed some light on this literally life-and-death issue, and it encourages

companies using these minerals to source them responsibly.” Id. In so concluding, Congress

relied upon the United Nations Group of Experts, which had “reported for years how parties to

the conflict in eastern Congo continue to benefit and finance themselves by controlling mines or

taxing trading routes for these minerals.” 156 Cong. Rec. S3976 (May 19, 2010) (statement of

Sen. Feingold); see also U.N. Security Council Resolution 1896, at ¶ 14 (Dec. 7, 2009); U.N.

Security Council Resolution 1857, at ¶ 15 (Dec. 22, 2008). The State Department, as well,

believed that the disclosure scheme would directly promote peace and security in the DRC. See,

e.g., Statement of Secretary of State Hillary Clinton (July 22, 2010), available at

http://www.state.gov/secretary/rm/2010/07/145039.htm (“President Obama has now signed into

law a measure that will require corporations to publicly disclose what they are doing to ensure

that their products don’t contain these minerals . . . . This is one of several steps we are taking to

disclosure scheme would directly achieve this more specific (and heightened) objective. (See
Pls.’ Reply at 26-27). But Congress’s objective was to “promote peace and security” in the DRC
more generally, as Plaintiffs themselves initially acknowledged, (see Pls.’ Brief at 52), and for
the reasons explained herein, the Court finds sufficient support for Congress’s predictive and
informed judgment that the disclosure scheme would directly advance that goal.
59
stop this illicit and deadly trade.”). It also bears emphasis that Congress was not working from a

blank slate on this subject. Congress previously considered (but did not pass) the Congo Conflict

Minerals Act of 2009, which would have required the same sort of disclosures at issue here.

Further, Congress did pass the Democratic Republic of the Congo Relief, Security, and

Democracy Promotion Act of 2006 several years earlier, reiterating the policy of the United

States to “make all efforts to ensure . . . [the] responsible and transparent management of natural

resources across the [DRC].” DRC Act § 108(a)(1), 109 Pub. Law No. 456, 120 Stat. 3386. At a

minimum, this record establishes that, contrary to Plaintiffs’ argument, Congress’s passage of

Section 1502 was not based on “mere speculation or conjecture,” see Edenfield, 507 U.S. at 770,

but derived from its “informed judgment,” Humanitarian Law Project, 130 S. Ct. at 2728, and,

to some degree, “history, consensus, and simple common sense,” Lorillard, 533 U.S. at 555. 29

Turning to the third prong of Central Hudson, Plaintiffs contest that the disclosure

scheme is a reasonable fit to accomplish Congress’s objective in promoting peace and security in

the DRC. They argue that “there are many less speech-restrictive (and more direct) ways the

government could pursue its goal of benefitting the DRC.” (Pls.’ Brief at 54). On this point, it is

well established that “‘the least restrictive means’ is not the standard; instead, the case law

requires a reasonable ‘fit between the legislature’s ends and the means chosen to accomplish

those ends.’” Lorillard, 533 U.S. at 566 (quoting Fla. Bar, 515 U.S. at 628); see also Nat’l

Cable & Telecomms. Ass’n v. FCC, 555 F.3d 996, 1002 (D.C. Cir. 2009) (“The government does

29
The Court also observes that this was not a situation in which “Congress’[s] justification
for a statute rested on ‘economic’ analysis that was susceptible to empirical evidence.” Taylor,
582 F.3d at 16. Rather, Congress’s passage of the disclosure scheme was based, at least in part,
on “a value judgment based on the common sense of the people’s representatives,” and as our
Circuit has held, the fact that its judgment “reflects unprovable assumptions about what is good
for the people . . . is not a sufficient reason to find that statute unconstitutional.” Id. (quoting
Paris Adult Theatre I v. Slaton, 413 U.S. 49, 62 (1973)).
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not have to show that it has adopted the least restrictive means for bringing about its regulatory

objective.”). Put another way, the government need not “demonstrate a perfect means-ends fit,”

nor must it “satisfy a court that is has chosen the best conceivable option.” Id. Rather, “the only

condition is that the regulation be proportionate to the interests sought to be advanced.” Id.; see

also Pearson, 164 F.3d at 657 (describing the question as whether there is a “reasonable fit

between the government’s goals and the means chosen to advance those goals”). Framed

appropriately, the Court holds that the disclosure scheme meets this requirement.

In many ways, the thrust of Plaintiffs’ challenge to the disclosure scheme takes root in

this final element of the Central Hudson test. That is, by focusing on those aspects of Section

1502 and of the Final Rule that require disclosures to be published on company websites,

Plaintiffs are essentially challenging the means Congress has chosen to achieve its objectives.

To this end, Plaintiffs insist that the disclosure scheme infringes upon the First Amendment “by

compelling companies to publicly state on their own websites . . . that certain of their products

are ‘not DRC conflict free.’” (Pls.’ Brief at 52). But in so arguing, Plaintiffs distort the nature

and extent of the disclosure requirements at issue. To be clear, all that Section 1502 and the

Final Rule require is that companies publish copies of their Form SD’s and/or Conflict Minerals

Reports—i.e., verbatim copies of disclosures already prepared for and filed with the

Commission—on their websites. See 15 U.S.C. § 78m(p)(1)(E); 77 Fed. Reg. at 56,362-56,363.

Neither Section 1502 nor the Final Rule requires companies to separately or conspicuously

publish on their website a list of products that have not been found to be “DRC conflict free,” as

Plaintiffs intimate, nor must companies physically label their products as such on the packaging

itself. 77 Fed. Reg. at 56,323. Rather, companies can comply with these disclosure

requirements simply by making their conflict minerals disclosures available on the same

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webpage that houses other required SEC filings, such as annual reports, proxy statements, and

other investor-related information. This approach qualifies as a “reasonable fit” under the

Central Hudson standard. 30

Plaintiffs take particular issue with the label that Section 1502 and the Final Rule

impose—the fact that, in some cases, companies must characterize their products as “not having

been found to be ‘DRC conflict free.’” In Plaintiffs’ view, “[t]he compelled disclosure is

intended to serve as a ‘scarlet letter.’” (Pls.’ Brief at 52). But considering the manner in which

Congress and the Commission implemented this requirement, the nature of the product-specific

disclosures, in particular, is reasonable and proportionate. For one, this description must be

made, if at all, in the body of a Conflict Minerals Report, not through some standalone,

conspicuous disclosure, as discussed above. Even then, issuers remain free to include whatever

additional clarification or explanation they deem necessary. 77 Fed. Reg. at 56,322. For

example, companies can include the statutory definition of “DRC conflict free,” to highlight its

specific meaning under the Final Rule, and they can add any relevant information concerning

their sourcing practices and supply chains they believe places the disclosure in accurate context.

Moreover, in response to some of the very same “scarlet letter” and “unfair stigma”

concerns Plaintiffs raise here, the Commission revised the required language during the

rulemaking process; rather than describing products as “not ‘DRC conflict free,’” as originally

proposed, the Final Rule requires issuers to describe such products as having “not been found to

30
Relatedly, Plaintiffs’ contention that “the government could pursue political or
diplomatic means” to promote peace and security in the DRC does nothing to undermine the
reasonableness of the disclosure scheme Congress saw fit to implement. (See Pls.’ Brief at 54).
While undoubtedly true that diplomatic efforts may also advance Congress’s goals—and, indeed,
the Court notes that the State Department is actively engaged in the DRC conflict already—it
does not follow that the disclosure scheme is an unreasonable fit as part of the United States’
comprehensive approach.
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be ‘DRC conflict free.’” Id. Additionally, the Final Rule’s temporary phase-in periods mitigate

and offset some of these concerns by permitting companies to describe products containing

necessary conflict minerals from an undetermined source as “DRC conflict undeterminable”

during the first few years of the Rule’s implementation. Id. This approach virtually eliminates

the risk that disclosures “will frequently be false,” as Plaintiffs suggest, insofar as the statements

“not been found to be ‘DRC conflict free’” and “DRC conflict undeterminable” do not amount to

a declaration that the issuer’s minerals were definitively found to have assisted in financing the

conflict. Furthermore, the phase-in periods provide several additional years for companies to

trace their supply chains and to more accurately determine the source of their conflict minerals.

Taking all of these elements of the disclosure scheme together, the Court finds a “reasonable fit”

between the relevant provisions of Section 1502 and the Final Rule and Congress’s objectives in

promoting peace and security in and around the DRC.

In sum, the Court concludes that the conflict minerals disclosure scheme that Plaintiffs

challenge passes muster under Central Hudson intermediate scrutiny, which means that

Plaintiffs’ claim under the First Amendment fails.

CONCLUSION

For the foregoing reasons, the Court concludes that Plaintiffs’ Motion for Summary

Judgment must be DENIED, and that the Commission’s and Intervenors’ Cross-Motions for

Summary Judgment must be GRANTED. An appropriate Order accompanies this

Memorandum Opinion.
Digitally signed by Judge Robert
L. Wilkins
DN: cn=Judge Robert L. Wilkins,
o=U.S. District Court,
ou=Chambers of Honorable
Robert L. Wilkins,
Date: July 23, 2013 email=RW@dc.uscourt.gov, c=US
Date: 2013.07.23 16:25:30 -04'00'

ROBERT L. WILKINS
United States District Judge
63