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Corps Don't Have to Disclose Their Conflict Minerals, Bloody Hands

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By Casey C. Sullivan, Esq. on August 21, 2015 6:59 AM

The D.C. Circuit has once again struck down a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act which required companies to disclose if their products used conflict minerals. Conflict minerals, gold, tantalum, tin, and tungsten, are the less shiny cousins of blood diamonds. They generally come from war torn areas of the Congo, where armed factions use child soldiers and child laborers in a fight to profit off the area's natural resources. With their origin in deep African mines and deeper human rights abuses, the products find their way into gold jewelry, electronics, computers and even children's games.

Dodd-Frank sought to address the humanitarian crises surrounding these minerals by requiring companies to disclose whether they used them. It was an attempt to shame companies into avoiding conflict minerals and, thus, potentially to undermine the strength of the military groups fighting for control over their production. It was also, the D.C. Circuit ruled, a violation of corporations' First Amendment rights.

The Blood on My Hands Is a Private Matter

The decision was described by Above the Law (perhaps a bit sensationally) with the line, "Corporations are people, now they can lie." In fact, while the ruling undermines human rights organizations' attempts to pressure businesses into abstaining from conflict materials, it doesn't in fact allow corporations to misrepresent the origin of their goods, nor does it grant new rights to businesses.

The decision was actually a reconsideration of an earlier ruling striking down the minerals disclosure requirement, which the court then said forced companies to "confess blood on its hands."The D.C. Circuit had ruled that, under the Supreme Court's ruling in Zauderer and related precedents, the disclosure rule violated the First Amendment because it was not sufficiently related to "preventing deception of consumers."

Last year, however, an en banc D.C. Circuit relaxed the Zauderer standard in American Meat Institute v. USDA. There, the court ruled that disclosure requirements do not interfere with First Amendment rights when they are reasonably related to a broader set of government interests, such as when disclosing the origin of meat products. Was the government's interest in informing consumers about conflict minerals similarly strong enough to justify disclosure?

Even a Lax Zauderer Is Limited to Advertising

Nope. The conflict minerals disclosure rules required companies to release information to the SEC and on their websites, but not in their actual advertising or point of sale. Zauderer, however, is confined to advertising, even if the government interests that can justify disclosures in advertising aren't as limited as the D.C. Circuit once thought.

For that reason, Zauderer's relaxed standard doesn't apply. Further, the rule does not survive Central Hudson's more demanding standards, since the government's interest -- helping prevent humanitarian crises -- isn't sufficiently connected to the disclosure requirement. That disclosure would somehow reduce armed conflict and humanitarian crises in mineral rich regions, particularly the Democratic Republic of Congo, is "entirely unproven and rests on pure speculation," the majority wrote.

The ruling is a disappointment to human rights groups, including plaintiff Amnesty International, who have long supported disclosures. It does, however, maintain parts of the rule, including requirements that companies investigate whether their requirements include conflict minerals.

Judge Sri Srinivasan dissented, saying that the rule is valid since the U.S. requires all sorts of disclosures from publicly held companies. That wasn't a good enough reason for the majority, however, who analogized it to Charles Dickens' aphorism that "whatever is is right."

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