A rare joint letter to the U.S. Securities and Exchange Commission from a group of defense law firms over shareholder proxy access received 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 New York-based Labaton Sucharow and Bernstein Litowitz Berger & Grossmann and Washington’s Cohen Milstein Sellers & Toll. They wrote their own letter, dated Aug. 25, supporting the SEC’s proposal to allow shareholders to nominate directors, exactly what the defense firms argued against the week before.
The defense firms that sent the earlier 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 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 who 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 their Aug. 17 letter, the seven corporate law firms urged the SEC not to adopt the proposal and, if it did, “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 that they did not support requiring companies to allow shareholder nominations but 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.
‘GUISE OF MODIFICATION’
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 urged 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’ firms’ letter said.
The plaintiffs’ firms’ letter acknowledged that it came after the SEC’s comment period ended on 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 that signed the letter were Milberg; Kaplan Fox & Kilsheimer; and Pomerantz Haudek Grossman & Gross, each based in New York; Radnor, Pa.-based Barroway Topaz Kessler Meltzer & Check; Berman DeValerio Pease Tabacco Burt & Pucillo of Boston; and Wilmington, Del.-based Grant & Eisenhofer.
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 that 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.”
Nate Raymond is a staff reporter for the New York Law Journal, an affiliate of the NLJ.