SEC Enjoined For Failing To Timely Issue Mineral Disclosure Rule

The Dodd-Frank Wall Street Reform Act imposed a requirement on the SEC in Section 1504 to promulgate a disclosure rule regarding certain extraction payments involving resource issuers within 270 days of passage or by April 17, 2011. The history of the Commission’s efforts in this area is riddled with delay, belated efforts to comply and court actions. Now a court has issued an injunction directing the agency to file an expedited schedule for promulgating the final rule, noting that additional future orders will be issued as necessary. Oxfam America, Inc. v. SEC, Civil Action No. 1:14-cv-13648 (D. Mass. Opinion issued Sept. 2, 2015).

On May 11, 2012 Oxfam filed suit under the APA alleging that the SEC had unlawfully withheld, and unreasonably delayed, promulgation of the final disclosure rule required by Section 1504. While the agency had posted projected dates, propose rules and reviewed comments, no final rule had been implemented over one year after the statutory deadline. The SEC then promulgated the final rule which was published in the Federal Register on September 12, 2012. The suit was dismissed.

The American Petroleum Institute, however, filed suit challenging the rule on October 10, 2012. While Oxfam intervened to defend it, the court remanded the matter to the SEC in July 2013 for further consideration, concluding that the agency had misread the statutory requirements and that the denial of certain exemptions was arbitrary and capricious.

Following remand the SEC announced a projected proposed rule date of March 2015. That date was pushed back. The Commission now plans to consider a revised proposed rule by October 2015.

Oxfam instituted this action on September 18, 2014. On cross motions for summary judgment the Court rejected that of the SEC while granting Oxfam’s motion. There were two critical questions: 1) whether agency action was “unlawfully withheld” under Section 706 of the APA; and 2) if the court had equitable jurisdiction under the APA regarding the proper remedy.

First, under Section 706 a reviewing court is required to compel agency action unlawfully withheld or unreasonably delayed. Here Congress set a deadline of 270 days. Nearly 17 months after that deadline the agency did adopt a rule but it was vacated. While the SEC claims that since it actually promulgated a rule it has not in fact “unlawfully withheld” action here the fact is that when the district court remanded the matter to the SEC the parties stood in the same position as before, according to the Court. Were it otherwise, “an agency could take inadequate action to promulgate a rule and forever relieve itself of the obligations mandated by Congress.” In any event, even if the 270 day deadline reset, the SEC is now over one year past what would have been the renewed deadline.

The second question is one of remedies. The SEC claimed that because an injunction is an extraordinary remedy the multifactor test set out in Telecommunications Research & Action Center v. FCC, 750 F. 2d 70 (D.C. Cir 1984) should be used to analyze if an injunction is appropriate. Oxfam disputed the SEC’s claim, arguing that the case does not apply in the “unlawfully withheld” context. While the DC Circuit has in fact applied those factors to refuse to issue an injunction against an agency in that context, the court rejected the SEC’s claim in view of APA requirements.

Rather, the court elected to follow the approach of the Tenth Circuit in Forest Guardians v. Babitt, 174 F. 3d 1178 (10th Cir. 1999). There the court held that “’when Congress by organic Statute sets a specific deadline for agency action, neither the agency nor any court has discretion. The agency must act by the deadline. If it withholds such timely action a reviewing court must compel the action unlawfully withheld’” quoting Forest Guardians. Following this principle the SEC was directed to file “with the Court in 30 days an expedited schedule for promulgating the final rule. The Court will make further orders as necessary. As such, the Court shall retain jurisdiction to monitor the schedule and to ensure compliance with its order.”

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