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Sept. 18 — Trinity Wall Street has asked the U.S. Supreme Court to review a decision allowing Wal-Mart Stores Inc. to exclude the Manhattan church's shareholder resolution touching upon the retailer's high-capacity gun sales.
The U.S. Court of Appeals for the Third Circuit April 14 held that the proposal could be omitted from the company's proxy materials under the Securities and Exchange Commission's ordinary business exclusion rule. A three-judge panel of the court later explained its decision in a July 6 opinion.
In its certiorari petition, Trinity Wall Street claims that the Third Circuit decision ignored binding precedent and gave “undue deference” to the SEC's informal no-action process.
The petition also charged that the SEC staff's no-action letters are “in conflict with the Commission’s own interpretive guidance.”
Moreover, Trinity argued that there “needs to be a line between the role of shareholders in deciding whether they want to approve the proposal on the merits and the role of agency staff or the judiciary in deciding that a proposal meets legal requirements for inclusion.”
The Third Circuit's ruling “strays to the wrong side of that line by faulting supposed indefiniteness in the drafting when such faults, if they exist, go to the merit of the proposal and not to whether it is false or misleading under the Commission’s proxy rules,” the church argued.
In a statement e-mailed to Bloomberg BNA, Trinity Wall Street rector Rev. Dr. William Lupfer said the church continues to believe that “corporate boards have the responsibility to oversee the creation of policies that will guide decision-making on marketing and other issues that could have momentous impact on the safety and well-being of society and to shareholder value.”
In response, Wal-Mart spokesman Randy Hargrove told BBNA in an e-mail that Wal-Mart believes the Third Circuit got it right.
“Under governing SEC rules, Trinity's proposal sought to regulate Wal-Mart’s daily decisions on the hundreds of thousands of products sold in our stores, clubs and online,” Hargrove said.
The Third Circuit decision stemmed from a ruling in November by U.S. District Court for the District of Delaware Judge Leonard P. Stark.
Stark held that Wal-Mart failed to comply with federal securities laws when it refused to include in its proxy materials Trinity's shareholder proposal, which sought more board oversight regarding “the sale of products especially hazardous to a retailer’s community, reputation, or brand, such as guns equipped with high capacity magazines.”
In its appeal to the Third Circuit, Wal-Mart claimed that “[a]bsent reversal, the District Court’s erroneous ruling will leave the Rule 14a-8(i)(7) ordinary business exclusion in tatters”.
J. Robert Brown Jr., a professor at the University of Denver Sturm College of Law, told BBNA in an e-mail that Trinity's petition “does a good job” at trying to get the high court's attention.
Brown observed that the petition points out possible conflicts among the circuits, which is perhaps the most common basis for the Supreme Court to take a case. In addition, the petition notes that a number of justices have expressed concern about the degree of deference that should be accorded to agency interpretations of their own rules, he said.
“Moreover, this Court seems more interested in business law matters so it may take a serious look at the petition,” Brown said.
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The petition is available at http://op.bna.com/car.nsf/r?Open=mgre-a2grbg
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