On April 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit held that requiring companies to disclose to the Securities and Exchange Commission (the "SEC") on new Form SD and on their websites that their products have "not been found to be 'DRC conflict free'" violates the First Amendment to the United States Constitution. This ruling, part of the Court's opinion in National Association of Manufacturers, et al., v. Securities and Exchange Commission, et al. (the "Conflict Minerals Case"), invalidated one part of the SEC's Conflict Minerals Rules (the "Rules") adopted pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is now Section 13(p) of the Securities Exchange Act of 1934 ("Exchange Act"). The Court's opinion upheld the remaining parts of the Rules against challenges under the Administrative Procedure Act and the Exchange Act, affirming in part last year's opinion of the U.S. District Court for the District of Columbia. The Court reversed the District Court's opinion only with regard to the First Amendment claims and remanded the case for further proceedings consistent with its opinion. The Court is withholding the mandate to the District Court to conduct further proceedings until seven days after the disposition of any petition for rehearing. The SEC has until May 29, 2014 to petition for rehearing.

The Court held that the Rules' requirement to describe products as not "DRC conflict free" compels speech in violation of the First Amendment. The Court reasoned that "it is far from clear that the description at issue — whether a product is 'conflict free' — is factual and not ideological" and that "[b]y compelling an issuer [of securities] to confess blood on its hands, the statute interferes with [the] exercise of the freedom of speech under the First Amendment." In reviewing whether the compelled speech violates the First Amendment, the Court declined to use the more relaxed "rational basis" standard urged by the SEC and instead employed an intermediate level of scrutiny for commercial speech that requires, among other things, that the regulation be "narrowly tailored." The Court found that the "conflict free" disclosure requirement failed to pass the narrow tailoring test, so it never considered whether the level of review should be the even more stringent strict scrutiny standard.

The standard of review for compelled commercial speech is at issue in another case pending before the D.C. Circuit, American Meat Institute v. United States Department of Agriculture. One member of the Conflict Minerals Case panel, Judge Srinivasan, dissented in part urging that the Court should wait to consider the First Amendment question until American Meat is decided en banc. In a footnote to its opinion in the Conflicts Minerals Case, the Court majority suggested that the SEC may wish to petition for rehearing and participate in the Court's consideration of the First Amendment issue presented in American Meat, currently scheduled for argument en banc on May 19, 2014.

The SEC has not yet responded publicly to Monday's decision. Without a Court mandate and further action by the District Court or announcement from the SEC, the implications of this ruling for companies that are preparing Forms SD and Conflict Minerals Reports in anticipation of the SEC's May 31, 2014 filing deadline remain unclear. We do not know yet whether the SEC will voluntarily defer, suspend or otherwise stay the May 31, 2014 filing deadline. Prudent companies may choose to continue diligence and other preparation for their Forms SD and Conflict Minerals Reports in anticipation of a May 31, 2014 deadline. Assuming the deadline is not deferred, suspended or otherwise stayed, companies will have until June 2, 2014 to file their Forms SD and Conflict Minerals Reports, if required, because the May 31, 2014 deadline falls on a Saturday.