Last week, I blogged about how four NYC public pension funds sued a company in a New York federal court over its decision to exclude a workforce diversity shareholder proposal after the company decided it had a “reasonable basis” to exclude and went through the process to procure this Rule 14a-8(j) “no objections” letter from Corp Fin. In that blog, we noted that the company’s Rule 14a-8(j) notice was not as detailed as most of the notices filed this proxy season.
On the same day, another lawsuit was filed by a different proponent in a different court – the Nathan Cummings Foundation sued in a D.C. federal court – over a company’s exclusion of a political spending shareholder proposal. Unlike the company involved in the lawsuit filed in New York, this company did indeed file quite a detailed Rule 14a-8(j) notice with the SEC. This lawsuit is moving fast with a preliminary injunction hearing scheduled for next week.
Unlike the first two lawsuits that deal with the substantive bases for exclusion under Rule 14a-8, the third lawsuit involves a procedural exclusion basis – namely whether the company properly notified the People for the Ethical Treatment of Animals (PETA) proponent about alleged deficiencies when the proposal was submitted to the company. The company did submit a detailed Rule 14a-8(j) notice. This lawsuit was filed in a New York federal court.
Given that lawsuits have been filed even when a company submits a detailed analysis as part of its Rule 14a-8(j) notice, you should be aware that the litigation risk is very real when a company decides whether it has a reasonable basis to exclude a shareholder proposal from its proxy…
Authored by
Broc Romanek