Fresh from its US Security and Exchange Commission (SEC) final vote in August, 2012, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 now faces its first legal test in US Appellate Court.
Filing documents by the US Chamber of Commerce (USCOC), the Business Roundtable (BRT), and National Association of Manufacturing (NAM) regarding its provisions around Section 1502 list several complaints and legal challenges. These challenges were first posed in October, 2012 with initial filing documents and followed earlier this month with a full preliminary brief filed to the court outlining the multi-party complaint.
The main basis for the lawsuit is the projected “onerous costs” which would face primarily the American manufacturing industry. Essentially the challenge to the provision is that the US Congress acted in haste to pass the law, and neither they nor the SEC could at the time consider the impact in terms of costs around the conflict minerals reporting provisions defined in Section 1502. Nor is there any evidence, supporting or to the contrary, that the effected “conflict regions” of the DRC and the central lakes nations of Africa would “benefit from the provisions.” For good measure, the seven points of the formal complaint also takes into account First Amendment provisions for companies exerting their legal right to express their business requirements throughout their own organization and value chain.
While officials from NAM were reached, few comments have been offered in terms of where the lawsuit heads next. Following the preliminary brief, the court may entertain additional hearings before assigning a formal trial date. So what could foreseeably happen? While the court will proceed expeditiously to address the complaint, scheduling actual trial proceedings could be 12-18 months into the future. For most companies affected by Dodd Frank and particularly Section 1502, these proceedings could well continue into several reporting cycles of the SEC filing dates. Which means while the provision could go away (or modified based on judicial interpretation) eventually, companies still need to plan on filing the required SEC form SD beginning with quarterly cycles this calendar year.
While an immediate court injunction to delay the filing periods is possible, but unlikely. The plaintiffs have yet to “go aggressive” to shelf the act while several additional interpretations and rulings are pending. As well, divesting Section 1502 from the rest of the Act would create more questions than answers regarding the Act in its entirety.
More information, including the brief filed to the court by the plaintiffs, can shed more light on where the direction of the lawsuit will head in the coming months.
Note: this blog is not produced by an attorney and does not intended to provide guidance that can be suggested as forward looking on any matters.