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Plaintiffs Firms Show Support for SEC Shareholder Rights Proposal
New York Law Journal
August 27, 2009
A rare joint letter to the U.S. Securities and Exchange Commission from a group of defense law firms over shareholder proxy access is receiving an even rarer response from nine of the country's largest plaintiffs law firms.
The firms, more typically seen in shareholder litigation than in regulatory squabbles, include Labaton Sucharow; Bernstein Litowitz Berger & Grossman; and Cohen Milstein Sellers & Toll. The letter, dated Tuesday, supports the SEC's proposal to allow shareholders to nominate directors, exactly what the defense firms argued against last week.
The defense firms that sent the joint letter were Wachtell, Lipton, Rosen & Katz; Simpson Thacher & Bartlett; Cravath, Swaine & Moore; Sullivan & Cromwell; Davis Polk & Wardwell; Latham & Watkins and Skadden, Arps, Slate, Meagher & Flom.
"These are the same firms that brought us the poison pill," said Lawrence A. Sucharow, a name partner at New York's Labaton Sucharow, which took the lead on the letter. "Not exactly exemplars of shareholder rights."
At the center of the dispute is a proposal before the SEC that would allow shareholders to nominate and elect individual directors to corporate boards. If approved in its current form, public companies would be required to include in their proxy materials shareholder nominees for directors that could comprise up to a quarter of the board. Shareholders also could put forward proposals for broader access to the ballot than the commission's regulations would require.
In an Aug. 17 letter, the seven corporate law firms urged the SEC not to adopt the proposal and, if it did, to be "to be cautious in implementing what all participants in this debate acknowledge will be one of the most significant rule changes in SEC history"
The defense firms said they did not support requiring companies to allow shareholder nominations. But they said they were open to allowing shareholders to submit proposals for governance changes that would allow them to nominate directors.
The bulk of the defense firms' 40-page letter focused on the functionality of the proposal and how the rules should be implemented.
Sucharow argued that the defense firms' suggestions would strip the proposal of most of its weight.
"In the guise of modification they actually sought to strip the proposed amendment of any hope of viability," he said. "It's just kind of interesting the approach that they took."
In particular, the plaintiffs firms urge the SEC not to adopt any provision that would allow corporations to "opt out" of the requirements.
"Shareholders, as the owners of the companies, should have a simple and straightforward method for nominating director candidates, and the SEC's proxy disclosure rules should not impede the shareholders' rights in this regard," the plaintiffs lawyers' letter says.
The plaintiffs firms' letter acknowledges it is coming after the SEC's comment period ended Aug. 17. But the firms claimed the need to "address certain of the arguments set forth" by "seven law firms representing various corporate interests."
The other plaintiffs firms who signed the letter were Milberg; Kaplan Fox & Kilsheimer; Barroway Topaz Kessler Meltzer Check; Berman DeValerio; Grant & Eisenhofer; and Pomerantz Haudek Grossman & Gross.
Sucharow acknowledged that it is uncommon for such highly competitive plaintiffs firms to work together.
"The defense bar has consistently been more organized than the plaintiffs bar," Sucharow said. "[Corporate firms] meet and discuss these things more than we do. They communicate more openly with each other. ... Maybe this is a step in the right direction for our bar as well."
Sucharow said the plaintiffs firms "reached out to several different additional firms that were either going to take an independent view or decided not to participate at this time."
