D.C. Circuit Decision Clarifies Scrutiny Level for First Amendment Challenges to Disclosure Requirements and Affects Conflict Minerals Rule (with Woody Comment and Lofchie YouTube Selection)

On July 29, 2014, the United States Court of Appeals for the District of Columbia issued its decision in American Meat Institute v. U.S. Dept. of Agriculture, and held that rational basis review applies to compelled disclosures, even in cases not involving consumer deception. At issue in American Meat was whether the U.S. Department of Agriculture's country-of-origin labeling rule (COOL) is "compelled commercial speech" and therefore a violation of the First Amendment.

In its en banc decision, the D.C. Circuit analyzed Zauderer v. Office of Disciplinary Counsel, in which the U.S. Supreme Court stated that a rational basis review should be applied to First Amendment challenges regarding commercial disclosure of "purely factual and uncontroversial" commercial information. Since 2012, the D.C. Circuit has limited the scope of Zauderer to cases in which the government has an interest in correcting or preventing consumer deception. See R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205 (D.C. Cir. 2012). In its American Meat decision, the court overruled the cases that relied upon such a narrow reading of Zauderer, including Nat'l Ass'n of Mfrs. v. SEC (regarding the conflict minerals rule), and clarified that rational basis review applies to disclosure mandates aimed at addressing problems other than deception.

Woody Comment: The American Meat case is closely linked to the challenge to the conflict minerals rule. In its April 14, 2014 decision, a split panel of the D.C. Circuit held that the conflict minerals rule violates the First Amendment to the extent that it requires issuers to disclose that their products have not been found to be "DRC conflict-free." The court declined to apply rational basis review, and instead applied a tougher standard of "intermediate scrutiny" under the First Amendment, which standard requires that a rule be narrowly tailored to its purpose. See Central Hudson Gas Elec. Corp. v. Public Service Comm'n, 447 U.S. 557 (1980). Using the Central Hudson standard, the court held that the conflict minerals rule violated the First Amendment because it was not narrowly tailored. Notably, Judge Srinivasan declined to join the majority on the First Amendment issue, arguing that the court should have withheld its decision pending the outcome of the en banc decision in American Meat. On May 29, 2014, the SEC petitioned for a rehearing en banc regarding the conflict minerals rule. It remains to be seen whether the D.C. Circuit will grant the petition for rehearing, but based on the ruling in American Meat, it seems that the First Amendment challenge to the conflict minerals rule faces an uphill battle in the D.C. Circuit given that the challenge would be required to demonstrate that the conflict minerals disclosure requirements have no rational basis.

Lofchie YouTube Selection: (for those who missed that ConLaw class)

See American Meat Opinion.See also: Conflict Minerals Specialty Page (available to Cabinet subscribers only).Related news: SEC Issues Partial Stay of Conflict Minerals Rule (with Woody Comment) (May 2, 2014); D.C. Circuit Strikes Down Part of SEC's Conflict Minerals Rule (with Woody Comment) (April 14, 2014).