Case Summary and Outcome

The U.S. Securities and Exchange Commission (SEC) required companies to disclose on their websites and in reports to the SEC whether they used minerals from African regions in conflict (conflict disclosure). The U.S. Court of Appeals ruled that the label was compelled speech, which the government failed to show would reduce violence in the Democratic Republic of the Congo (DRC), and thus it violated the companies’  free speech rights. The current case reviewed the U.S. Court of Appeal’s earlier ruling on the disclosure in light of a decision that allowed the government to compel meat companies to put origin of production labels on their products. The court upheld its earlier ruling, stating that the meat label case did not apply since the conflict disclosure label did not deal with advertisement or point of sale issues.

Facts

The 2010 Dodd Frank Wall Street reform law included a provision requiring public companies to disclose on their websites and in reports to the SEC whether the products they produce include materials from war torn regions of Africa, specifically the DRC.

The National Association of Manufacturers (NAM) challenged the law arguing that the SEC adopted the costliest rule and rejected alternative regulation (administrative procedure). NAM also argue that the law’s requirement to place a “conflict free” label was compelled speech that violated the First Amendment.

In June 2013, the U.S. District Court for the District of Columbia ruled against NAM on both arguments. On April 14, 2014, the U.S. Court of Appeals upheld the district court’s ruling on the administrative procedure issue, but rejected its ruling on the compelled speech issue. On August 18, 2015, the U.S. Court of Appeals  reheard the case on the First Amendment issue per the requests of the SEC and Amnesty International in light of this court’s intervening decision in the case of American Meat Institute v.U.S. Department of Agriculture, 760 F.3d 18 (AMI) and its application of the Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (Zauderer). The AMI case ruled that the federal government did not violate the First Amendment when it compelled companies to place country of origin labels on their meat.

Decision Overview

The decision overview is based on the most recent court decision on the First Amendment compelled speech issue.

The main issue in this case concerned the purpose of the conflict minerals label. Defining the purpose allows the court to pick what test to apply in judging the constitutionality of compelled speech. If the purpose of compelled speech related to voluntary commercial advertising then a more relaxed test listed in Zauderer and used in AMI, the meat labeling case, could be applied. The Zauderer two part test required that (1) the government’s compelled speech advances a substantial interest, and (2) the compelled speech was reasonably related to the government’s substantial interest.

If the compelled speech was for commercial speech for other purposes, then the court would apply the test listed in the Central Hudson Gas & Electric Corp. v Public Service Commission, 447 U.S. 557. The Central Hudson test requires governments to show (1) substantial government interest (2) directly and materially advanced by the restriction (3) and that the restriction is narrowly tailored.