National Association of Manufacturers v. Securities and Exchange Commission

In 2010, Congress enacted § 1502 of the Dodd-Frank Act, which required the Securities and Exchange Commission (SEC) (defendant) to issue a rule requiring companies that use certain minerals to disclose where such minerals originated. Congress passed § 1502 in response to the humanitarian abuses in the Democratic Republic of the Congo (DRC), which was being financed by the sale of conflict minerals. In 2012, the SEC issued its conflict-minerals rule (rule). The rule mandated certain companies to file conflict-mineral reports with the SEC identifying products that were not “DRC conflict free” and providing source information about the minerals used in such products. Companies also had to post such reports on their websites. Congress did not hold hearings regarding § 1502’s likely impact before passing the provision. Preenactment congressional hearings regarding the DRC did not address conflict-mineral reporting. Postenactment hearings featured evidence touting the effectiveness of § 1502 in alleviating the DRC’s human-rights problems as well as evidence that § 1502 made things worse. Moreover, there was evidence that § 1502 may have backfired by encouraging newly unemployed miners to join rebel groups. The National Association of Manufacturers (association) (plaintiff) sued the SEC, alleging that the requirement that companies describe certain products as not DRC conflict free was government-compelled speech that violated the First Amendment to the United States Constitution. In 2014, the court decided that the rule violated the First Amendment. In doing so, the court relied on circuit precedent in ruling that the United States Supreme Court’s decision in Zauderer v. Office of Disciplinary Counsel, which used rational-basis review to scrutinize an advertisement, was inapplicable because the rule did not combat false advertising. Accordingly, the court applied intermediate scrutiny, which the rule failed because it was not narrowly tailored to achieve the government’s goal. The en banc circuit court subsequently held in another case that Zauderer was not limited to misleading advertising. The SEC then asked the court to reconsider its 2014 decision.