Trinity v. Wal-Mart: Third Circuit Reverses District Court, Permits Wal-Mart to Exclude Shareholder Proposal under Rule 14a-8 | Practical Law

Trinity v. Wal-Mart: Third Circuit Reverses District Court, Permits Wal-Mart to Exclude Shareholder Proposal under Rule 14a-8 | Practical Law

The US Court of Appeals for the Third Circuit reversed the district court's decision in Trinity Wall St. v. Wal-Mart Stores, Inc., which held that a shareholder proposal was improperly excluded from Wal-Mart's 2014 proxy materials and enjoined Wal-Mart from excluding the proposal from its 2015 proxy materials.

Trinity v. Wal-Mart: Third Circuit Reverses District Court, Permits Wal-Mart to Exclude Shareholder Proposal under Rule 14a-8

by Practical Law Corporate & Securities
Published on 14 Apr 2015 • USA (National/Federal)
The US Court of Appeals for the Third Circuit reversed the district court's decision in Trinity Wall St. v. Wal-Mart Stores, Inc., which held that a shareholder proposal was improperly excluded from Wal-Mart's 2014 proxy materials and enjoined Wal-Mart from excluding the proposal from its 2015 proxy materials.
On April 14, 2015, the US Court of Appeals for the Third Circuit issued an order reversing the US District Court for the District of Delaware's November 2014 ruling in Trinity Wall St. v. Wal-Mart Stores, Inc.
On November 26, 2014, the District Court held that a shareholder proposal by Trinity Wall Street (Trinity) was improperly excluded from Wal-Mart Stores, Inc.'s (Wal-Mart) proxy materials for its 2014 annual shareholders meeting (No. 14-405, (D. Del. Nov. 26, 2014)). The proposal sought to amend the charter of Wal-Mart's Compensation, Nominating and Governance Committee to add the duty of overseeing the formulation and implementation of policies and standards that determine whether Wal-Mart should sell a product that:
  • Especially endangers public safety and well-being.
  • Has the substantial potential to impair Wal-Mart's reputation.
  • Would reasonably be considered by many offensive to the family and community values integral to Wal-Mart's promotion of its brand.
The narrative portion of the proposal stated that this additional duty would extend to determining whether or not Wal-Mart should sell guns equipped with magazines holding more than ten rounds of ammunition and to balancing the benefits of selling these guns against the risks that these sales pose to the public and Wal-Mart's reputation and brand value.
The District Court's ruling came after Wal-Mart received no-action relief from the SEC's staff on the exclusion of the proposal. Most importantly, the court also granted injunctive relief to Trinity, enjoining Wal-Mart from excluding Trinity's proposal from its 2015 proxy materials. For more on the District Court's ruling, see Legal Update, Trinity v. Wal-Mart: District Court Rules Shareholder Proposal Improperly Excluded under Rule 14a-8.
The Third Circuit's order states that Wal-Mart may exclude Trinity's proposal from its 2015 proxy statement, which must be filed with the SEC by April 15, 2015. The order also indicates that the Third Circuit will issue its opinion on this matter at a later time.
To learn more about Rule 14a-8 shareholder proposals, see:
Update: On July 6, 2015, the Third Circuit issued an opinion explaining the rationale for its reversal of the District Court's ruling.