Oxfam America Argues SEC Has “Unlawfully Withheld And Unreasonably Delayed” Resource Extraction Rule
Friday, March 6, 2015

I’ve often wished that my legal acumen could be judged by the same standard as professional baseball players.  If that were the case, I could be wrong nearly 60% of the time and yet be considered one of the greatest legal mavens of all time.  I would also be happy if I were subject to the standards of timeliness that the SEC applies to itself (but not others).

Last fall, I wrote about Oxfam America’s second lawsuit to force the SEC to adopt a resource extraction disclosure rule under Section 1504 of the Dodd-Frank Act.  Readers may recall that Congress ordered the SEC to adopt rules by April 17, 2011.  The SEC, however, missed that deadline by over a year and then in 2013 the U.S. District Court for the District of Columbia vacated the rule and sent it back to the SEC.  American Petroleum Institute v. SEC, 953 F. Supp. 2d 5 (D. D.C. 2013).  When the SEC failed for over a year to adopt a new rule, Oxfam America sued the SEC again.  In January, Oxfam America moved for summary judgment and late last month the SEC filed its brief in support of its Cross-Motion for Summary Judgment and Opposition to Oxfam America’s motion.

Based on the SEC’s arguments in its brief, I imagined the following letter from an issuer seeking clemency for being years late in filing its annual report on Form 10-K:

Dear Commissioners,

We acknowledge that under the SEC’s rule our Form 10-K was due nearly four years ago, but we are working hard and expect to get it completed by this October.  In the meantime, we don’t think you should order us to finish the job more quickly for the following reasons:

We are corporation headed by a five-member board.  In view of the sheer magnitude of our directors’ responsibilities, by necessity, projects must be prioritized.

The time that we take to file a Form 10-K should be governed by a “rule of reason”.  In fact, we filed a Form 10-K more than a year after it was due.  However, we erred in reading the applicable law, it was rejected and we had to start over.  It has only been 20 months since that rejection. “This relatively short period does not support a finding of unreasonable delay.”

When the SEC has specified a due date, that due date is not a “controlling consideration”.  The SEC’s deadline should not be understood to warrant the imposition of extraordinary relief given that our delay has been only 20 months.

Our failure to file a Form 10-K does not directly threaten human health and welfare.  The Form 10-K is generally designed to disclose information.  A “modest delay would not likely lead to direct harm to [an] individual’s health or welfare.”

The SEC should consider all of the other activities undertaken by us.  We face a number of other deadlines.  An SEC order compelling us to file a Form 10-K could require reordering company priorities inconsistent with our assessment of the relative significance of competing priorities.

The SEC hasn’t identified particular people or groups that may be prejudiced by our tardiness.  The SEC has done little other than “generally referring to the interests of unidentified citizens” who may be prejudiced.

For the foregoing reasons, we respectfully request that the SEC not order us to file within the next 30 days and instead allow us to report on our progress in filing the Form 10-K no later than October 15, 2015.

I’m sure that the SEC expects a more favorable response than it would give to the above letter.  It’s too bad we all can’t be evaluated like Ted Williams.

 

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