Corporate Counsel Weekly™ helps corporate lawyers get the big picture on the legal challenges facing corporations today. Practitioners can discover trends on the horizon and stay alert to the full...
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.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The petition is available at http://op.bna.com/car.nsf/r?Open=mgre-a2grbg
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)