Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 1 of 6 No. 1:13-cv-00635-RLW IN THE 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, Plaintiffs, v. SECURITIES AND EXCHANGE COMMISSION, Defendant, AMNESTY INTERNATIONAL USA and AMNESTY INTERNATIONAL LTD., Intervenors-Defendants. RESPONSE TO PLAINTIFFS NOTICE OF SUPPLEMENTAL AUTHORITY: API v. SEC On July 3, 2013, plaintiffs filed a notice of supplemental authority to bring to the Court s attention the decision in American Petroleum Institute v. SEC, No. 12-1668 (D.D.C. July 2, 2013). Plaintiffs mistakenly assert that the decision supports their argument that the Commission acted arbitrarily by not providing a de minimis exemption here, but API v. SEC is distinguishable from this case in several respects. In API, the court vacated a Commission rule requiring disclosures of payments to foreign governments for extractive resources based in part on the
Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 2 of 6 Commission s decision to deny a requested exemption for payments to countries that prohibit payment disclosure. Slip Op. at 22-27. In criticizing the Commission s reasoning that the relevant statute s objectives would be best served by denying the exemption, the court stated that an exemption is by definition inconsistent with the statutory requirement on which it operates and no legislation pursues its purposes at all costs. Id. at 24 (internal quotation marks omitted). The court also recognized, however, that a statute s purpose is relevant to the exemption analysis. As the court stated, [i]t may be entirely reasonable for the Commission to conclude a requested exemption goes to the heart of the provision s goal, and that the burden reduction is not worth this loss. Id. at 25. The Commission made just such a decision here. The Commission determined that an exemption based upon allegedly de minimis uses of conflict minerals would thwart, rather than advance, (JA743) Section 1502 s purpose of inhibiting the ability of armed groups in the Covered Countries to fund their activities by exploiting the trade in conflict minerals (JA721). The Commission noted that the statute itself already include[s] an express limiting factor namely that a conflict mineral must be necessary to the functionality or production of an issuer s product to trigger any disclosure regarding those conflict minerals. JA743. Moreover, as the Commission explained, in light of the nature of the conflict minerals, they are often used in 2
Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 3 of 6 products in very limited quantities. Id. (quoting State Department comment letter). And there are instances in which only a minute amount of conflict minerals is necessary for the functionality or production of a product. Id. Thus, to create a broad exemption based upon the amount of a conflict mineral used in a product could have a significant impact on the final rule. Id. (quoting State Department comment letter). The court in API also concluded that commenters suggestion that the exemption could be limited to four particular countries or to all countries that prohibited disclosure as of a certain date would have ameliorated the Commission s concern that an exemption would encourage countries to adopt laws prohibiting disclosures. Slip Op. at 26. But there is nothing in the record here that establishes that a general exemption based upon allegedly de minimis uses of conflict minerals could have been created without doing violence to the disclosure scheme Congress envisioned. While several commenters proposed various de minimis thresholds, none substantiated the proposition that those thresholds would not thwart the statutory purpose. See, e.g., NAM JA396-97 (asserting, with no analysis, that proposed de minimis thresholds would have little corresponding effect in the DRC); Semiconductor Equip. JA236 (proposing one-gram-per-year threshold without addressing the number of issuers potentially affected or whether such a threshold would impact the ability of armed groups to fund their activities). 3
Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 4 of 6 Moreover, a number of comments supported the Commission s determination that exempting small uses of conflict minerals could have a large aggregate impact on the rule s effectiveness in accomplishing Congress s purpose. See, e.g., Matheson JA602 (allowing a de minimis exemption would destroy the intent of the law because, for example, a computer logic chip contains perhaps a few milligrams of tantalum but the semiconductor industry as a whole consumes over 100 tons of tantalum metal annually ); Durbin JA103 (the weight of conflict minerals essential to many products is very small as is often the percentage by weight or dollar value of the conflict minerals as a proportion of unit cost ); Calvert JA0581 (a de minimis exemption would risk significant dilution of the law). 1 The Commission therefore did more here than rest on the blanket proposition that avoiding all exemptions best furthers the statute s purpose. Slip Op. at 25. It reasonably determined, based on the evidence before it, that providing a general exemption based upon small uses of conflict minerals would affirmatively thwart Congress s purposes. JA743. That decision was well within the Commission s discretion. 1 Of course, as discussed at oral argument, should an issuer be able to make an appropriate showing, the issuer could apply for more particularized exemptive relief. 4
Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 5 of 6 July 9, 2013 Respectfully submitted, TRACEY A. HARDIN Assistant General Counsel GA Bar No. 324996 /s/ Benjamin L. Schiffrin BENJAMIN L. SCHIFFRIN Senior Litigation Counsel NY Bar No. 4277117 DANIEL STAROSELSKY Senior Counsel IL Bar No. 6292004 Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549-9040 (202) 551-5003 (Schiffrin) Counsel for Defendant Securities and Exchange Commission 5
Case 1:13-cv-00635-RLW Document 35 Filed 07/09/13 Page 6 of 6 CERTIFICATE OF SERVICE I hereby certify that on July 9, 2013, I caused the foregoing Response to Plaintiffs Notice of Supplemental Authority: API v. SEC to be filed with the Clerk of Court for the United States District Court for the District of Columbia using the CM/ECF system. Service was accomplishing on all parties via the Court s CM/ECF system. /s/ Benjamin L. Schiffrin BENJAMIN L. SCHIFFRIN