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Now that NAM et al’s emergency stay motion in the conflicts minerals case has been denied, the question is what happens next.  Clues can be found in the briefing for the unsuccessful emergency stay motion.

For NAM et al to have been successful in the emergency stay motion, NAM et al would have had to make the following showing:

  • Probability of success on the merits that the rule should be vacated.  Here NAM et al argued the unconstitutional portion of the cannot be severed from the rest of the rule.  The reason is the rule is not severable is because the rule serves no purpose without the unconstitutional portion.  There were some collateral issues as well, such as whether the interim SEC guidance required notice and comment before being implemented.  For convenience, I will refer to this as the “severability issue.”
  • NAM et al will suffer irreparable harm absent a stay.
  • The balance of equities and the public interest favor a stay.

To illustrate a point, for all we know the three judge appellate panel firmly believed NAM et al clearly prevailed on the severability issue but perhaps the judges denied the motion because they did not think NAM et al and related issuers would suffer irreparable harm.  Of course, we don’t know because the order denying the stay was only one sentence long.

The original appellate court ruling which held a portion of the rule unconstitutional remanded the proceeding to the district court for proceedings consistent with the appellate court’s opinion.  The severability issue may be the only issue that matters in a ruling on the merits, and that is where NAM et al will have to hang their hat.

The fly in the ointment of the foregoing analysis is the SEC apparently can still move for an en banc rehearing of the original decision. notes an en banc hearing, if it occurs, will likely be a lengthy process:  The case has to be re-argued in front of the entire en banc court and the opinions must be circulated and considered among the much larger en banc court, resulting in the interval between oral argument and en banc disposition being five times greater, on average, as compared to a three-judge panel disposition.  Of course, the SEC could win, which I surmise leaves NAM with no alternative but to petition the Supreme Court for review.


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