Ah, Cracker Barrel. A decade ago, the biggest Corp Fin-related controversy was the shareholder proposal’s “ordinary business” exclusion basis and the SEC Staff’s Cracker Barrel no-action letter under Rule 14a-8(c)(7) (the basis has since been renumbered to 14a-8(i)(7)). Those were much simpler times. Back then, the SEC’s dealings in corporate governance matters were pretty much limited to the shareholder proposal rule.
The Cracker Barrel saga arose due to a ’92 no-action letter under which Corp Fin allowed that company to exclude a anti-sexual orientation discrimination proposal by stating that all employment-related proposals raising social issues were excludable. Enough fuss was raised so that the Commission specifically overruled its Staff’s position in a ’98 rulemaking and returned the agency’s position on social issues to a “case-by-case analytical approach.” Corp Fin has been making this case-by-case determination when deliberating on social proposals ever since.
Now, a similar case has been brought in the US District Court, Southern District of Texas, by Apache Corporation, which is seeking a declaratory judgment supporting its exclusion of a shareholder proposal submitted by the New York City Employees’ Retirement System. This case seeks to enjoin a lawsuit brought by NYCERS in the Southern District of New York. The facts are as follows:
- For the last two years, NYCERS has submitted proposals to companies in a campaign designed to fight discrimination against gays/lesbians and transgendered people (eg. asking companies to amend their EEO statements a la Cracker Barrel).
- This proxy season, NYCERS submits a proposal to Apache asking for the implementation of a program based on “equality principles” that include additional steps to avoid discrimination against this group of people.
- On March 5th, Corp Fin provides no-action relief allowing Apache to omit the proposal on ordinary business grounds, noting that some of the principles in the proposal relate to ordinary business.
- On April 8th, Apache filed for a temporary restraining order to try to prevent NYCERS from delaying its annual meeting and mailing supplemental materials.
- On April 9th, NYCERS files a lawsuit in SDNY, arguing – among other things – that Corp Fin had denied no-action relief for similar proposals in the past (specifically citing these no-action responses: Armor Holdings ((i)(7) denied on burden grounds) (4/3/07) and Aquila ((i)(10) denied)(3/2/06)) and that the Court doesn’t owe deference to Corp Fin’s positions anyways.
- After it filed its lawsuit, NYCERS subsequently filed for a temporary restraining order, but then quickly changed its request to an affirmative/mandatory injunction to force Apache to deliver supplemental proxy materials ahead of its May 8th annual meeting.
This is where this battle stands today, although it promises to move quickly. We have posted all of the documents filed in the SDTX and SDNY so far in our “Shareholder Proposals” Practice Area.
Corp Fin Tweaks Form 8-K Interps Again
For the second time since their issuance, Corp Fin has tweaked its new Form 8-K Interps to fix a conflict. As had been addressed in our “Q&A Forum” last week, new Interp 202.01 seemingly conflicted with Item 601 of Regulation S-K – with the Staff’s fix, that is no longer so.
John Newell has updated his three sets of redlined 8-K Interps against the old guidance that the Interps updated. John has also provided this redlined version of the new Form 8-K Interps against what the Staff originally issued on April 2nd – which will help those of you that printed them out back then to see what was changed on April 3rd and April 10th.
Closing Time: When the Founder is Ready to Sell
Tomorrow, catch the DealLawyers.com webcast – “Closing Time: When the Founder is Ready to Sell” – to hear about the special issues that come into play when the founders of a privately-held company want to sell out to a private equity firm or a professional roll-up operator. Join these experts:
- Brad Finkelstein, Partner, Wilson Sonsoni Goodrich & Rosati LLP
- Don Harrison, Senior Counsel, Google
- Armand Della Monica, Partner, Kirkland & Ellis LLP
- Geoffrey Parnass, Partner, Parnass Law
- Sam Valenzisi, Vice President, Lincoln International LLC
SEC Tweaks Form S-11 to Permit Incorporation By Reference
Last week, the SEC issued this adopting release indicating it had adopted the amendments to Form S-11 to permit companies using this form to incorporate by reference previously filed ’34 Act reports.
- Broc Romanek